Saudi Civil Transactions Law: key articles, limitation and damages

The Saudi Civil Transactions Law (Royal Decree M/191 of 29/11/1444 AH) is the Kingdom's codified general law of contracts, obligations and property. Published on 19 June 2023, it applied 180 days later, in mid-December 2023. Its 721 articles cover contracts, liability for harm, damages, limitation periods, named contracts and ownership, and end with 41 general rules.

This guide is written from the official text listed by the Bureau of Experts at the Council of Ministers and the decree published in Umm Al-Qura, as read on 29 October 2026 [1][2]. It is general information, not legal advice. For a specific contract or dispute, read the official text and speak to a licensed lawyer.

What is the Saudi Civil Transactions Law?

The Saudi Civil Transactions Law is the general law that governs private dealings between people and companies: how a contract is formed and ended, when someone must pay compensation, how debts pass and end, and what ownership allows. It applies unless a special law has its own rule (Art. 1(2)) [1].

Article 1 sets the order a court follows. It applies the law's texts to every matter they cover in wording or meaning; if no text applies, it uses the general rules in the final provisions; if no rule applies, it uses the Sharia rulings most suited to the law [1].

The issuing decree adds three points that matter in practice [2]:

• Commercial dealings: the law and clause 5 apply to commercial transactions where commercial laws have no special text, as far as the nature of the dealing allows (clause 6).
• Earlier facts: the law applies to facts that happened before it took effect, except where a party relies on a conflicting legal text or judicial principle, or where a limitation period started before it applied (clause 5).
• Other laws: it does not affect treaties, the jurisdiction of public or judicial bodies, or registration and licensing formalities (clause 4).

Periods in the law are counted by the Hijri calendar (Art. 2) [1].

When did the Civil Transactions Law take effect?

The law was approved by Council of Ministers decision 820 of 24/11/1444 AH and issued by Royal Decree M/191 of 29/11/1444 AH (18 June 2023) [1][2]. It was published in Umm Al-Qura on 1/12/1444 AH (19 June 2023) and applies 180 days after publication (Art. 721), which by count falls in mid-December 2023 [1][2].

As of October 2026, the Bureau of Experts lists the law as in force, and its page marks no amended article [1]. On the day it took effect, the decree repealed Articles 212 to 217 of the Law of Procedure before Sharia Courts and part of Article 211, Article 25 of the Law of Advocacy (officially the Code of Law Practice), and three definitions in another law. It also amended Article 16(3) of the Commercial Courts Law to cover disputes from the partnership contracts in the new law (clauses 2 and 3) [2][3][4].

How the 721 articles are organised

The law has a preliminary part, three sections and final provisions. The table below gives the article ranges so you can find a rule in the official text quickly; these ranges follow the headings in the Bureau of Experts copy [1].

Contracts under the Civil Transactions Law

A contract is formed when an offer is linked to an acceptance to produce a legal effect (Art. 31). Consent can be expressed in words, writing, an understood gesture or by conduct, explicitly or implicitly, unless a law, agreement or the nature of the deal requires otherwise (Art. 33) [1].

Some rules that often come up [1]:

• Silence: silence is not acceptance unless agreed or a presumption shows it, such as an offer tied to earlier dealings between the parties (Art. 37).
• Negotiation: negotiating does not oblige anyone to sign, but a party who negotiates or breaks off in bad faith is liable for the harm caused, excluding the profit expected from the contract (Art. 41).
• Deposit (عربون): paying a deposit gives only the payer the right to withdraw, and he loses the deposit if he does, unless agreed otherwise (Art. 44).
• Standard-form contracts: acceptance is limited to accepting terms set by the offeror without negotiation (Art. 40).

Mistake, coercion and exploitation

A party may ask to annul a contract for a fundamental mistake without which he would not have agreed (Art. 57), or for coercion (Arts. 64 to 67) [1]. If one party exploited the other's evident weakness or pressing need to conclude a contract that caused him gross unfairness (غبن), the court may reduce his obligations, increase the other side's or annul the contract. The claim must be filed within 180 days of the contract (Art. 68) [1].

Unfairness alone is not enough to annul a contract, except for the property of a person who lacks or has limited capacity, or where a law says so, and it cannot be raised against a contract made by auction (Art. 69) [1].

Binding force of a contract: "the contract is the law of the parties"

The idea often quoted as "the contract is the law of the parties" appears in Article 94: once a contract is validly made, it cannot be undone or changed except by agreement or by a legal text, and the rights it creates arise at once [1]. Article 95 adds that it must be performed as written and in good faith, and covers what custom and its nature require [1].

The general rules repeat the point: the basic presumption in contracts and conditions is that they are valid and binding (Art. 720, rule 10) [1].

Hardship, impossibility and termination

The law gives limited relief when circumstances change [1]:

• Hardship (Art. 97): if general, exceptional and unforeseeable events make performance so onerous that the debtor faces a heavy loss, he may call for negotiation without undue delay. He must keep performing meanwhile; if no agreement is reached in a reasonable time, the court may reduce the obligation to a reasonable level. Any agreement against this article is void.
• Impossibility (Art. 110): if performance becomes impossible for a reason beyond the debtor's control, the obligation and the counter-obligation end and the contract is terminated by law.
• Termination for breach (Arts. 107 and 108): after giving notice, the other party may ask for performance or termination, with damages where due. Parties may agree on termination without a court ruling, but notice is still required unless they expressly waive it.
• Effect of termination (Art. 111): the parties return to their position before the contract; for contracts over time, termination has no retroactive effect.

The parties may also agree that the debtor bears the risk of force majeure (Art. 174) [1].

Liability for harm and compensation

Article 120 states the basic rule of tort liability: every fault that causes harm to another obliges the person who committed it to compensate [1]. A person is not liable if the harm came from a cause beyond his control, such as force majeure, a third party's fault or the victim's own fault, unless agreed otherwise (Art. 125) [1].

When the victim shared in causing or increasing the harm, his right to compensation falls in whole or in part, in proportion to his share (Art. 128) [1].

How compensation is measured

Compensation must repair the harm in full, by putting the victim back where he was or would have been without the harm (Art. 136) [1]. It covers the loss suffered and the gain missed, when they are a natural result of the harmful act (Art. 137). Compensation also covers moral harm, such as physical or psychological injury from an attack on a person's body, freedom, honour, reputation or social standing (Art. 138) [1].

A claim for compensation for a harmful act is not heard after three years from the date the victim knew of the harm and of the person responsible, and in all cases not after ten years from the harm (Art. 143) [1].

Penalty clauses and agreed damages

The parties may fix compensation in advance, in the contract or a later agreement, except where the obligation is a sum of money, and no notice is needed to claim it (Art. 178) [1]. This is what Saudi practice calls a penalty clause (الشرط الجزائي).

The agreed amount is not due if the debtor proves the creditor suffered no harm. The court may reduce it, at the debtor's request, if it was excessive or the obligation was partly performed, and may raise it, at the creditor's request, to the full harm where the debtor committed fraud or gross fault. Any agreement against these rules is void (Art. 179) [1].

Where no amount is agreed, the court assesses it. For a contractual obligation, a debtor who committed no fraud or gross fault pays only the harm that could normally be foreseen when the contract was made (Art. 180) [1].

Illustrative example: a late fit-out contract

Illustrative example: a fit-out contract worth SAR 400,000 sets agreed damages of SAR 2,000 for each week of delay. The contractor finishes 10 weeks late, so the clause gives SAR 20,000.

• The owner does not need to send notice to claim the SAR 20,000 (Art. 178).
• The contractor can avoid paying only by proving the owner suffered no harm, or ask the court to reduce the sum if it is excessive (Art. 179).
• If the owner's real loss is higher, he can ask for more only by proving fraud or gross fault (Art. 179).

The figures are invented for illustration; the court weighs the facts of each case.

Limitation periods (التقادم) in the Civil Transactions Law

The law does not let rights expire by time; instead, after a set period a claim "is not heard" against a defendant who denies it (Art. 295) [1]. The court applies this only at the request of the debtor or a person with an interest (Art. 306) [1].

The period runs from the day the right becomes due, unless a text says otherwise (Art. 299). It stops running while an excuse prevents the claim, including good-faith negotiation between the parties at the end of the period or a moral obstacle (Art. 300) [1]. These short periods apply even if the dealings continue, but if a written instrument is made for a professional-fee claim or a 1-year claim, it is heard for 10 years from the instrument (Art. 298) [1].

Named contracts: sale, lease, contracting, agency and guarantee

Section 2 regulates specific contracts in detail, each with its own chapter [1]. Among the most used in business:

• Sale (Arts. 307 to 360): sale transfers ownership of the item for a cash price (Art. 307); a hidden-defect claim has the 180-day limit above.
• Lease (Arts. 407 to 450) and contracting (مقاولة, Arts. 461 to 478): the main contracts for property and construction work.
• Agency (وكالة, Arts. 480 to 505): the principal puts the agent in his place for a legal act (Art. 480).
• Partnership contracts (Arts. 528 to 577): they must be in writing or they are void, though a party cannot use that nullity against third parties (Art. 528).
• Guarantee (كفالة, Arts. 578 to 606): the creditor cannot pursue the guarantor alone before the debtor, or enforce on the guarantor's assets before the debtor's, unless the guarantor is jointly liable; the court applies this only if the guarantor raises it (Art. 591).

Employment and insurance contracts are left to their own special laws (Arts. 479 and 607) [1]. The law has no separate chapter titled ju'ala (reward contract), brokerage or supply; such dealings fall under the general contract rules and any special laws that apply.

Where a contract must be proven in court, the Evidence Law adds its own rule: a transaction above SAR 100,000 must be proven in writing [5].

The 41 general rules (Article 720)

Article 720 lists 41 general legal maxims that courts apply when no text covers a matter, as far as they do not conflict with legal texts [1]. Examples:

1. Matters are judged by their purposes (rule 1).
2. In contracts, intent and meaning count, not words and form (rule 2).
3. Custom is authoritative (rule 3).
4. The basic presumption in contracts and conditions is validity and binding force (rule 10).
5. No statement is attributed to a silent person, but silence where a statement is needed counts as one (rule 13).
6. Harm must be removed (rule 16).
7. Gain goes with liability for loss (rule 34).

Implementing regulations, the official text and PDF copies

The Civil Transactions Law has no implementing regulations, and none of its 721 articles calls for them [1]. Instead, the approving decision asked public bodies to review their own laws within 180 days to align them with it, and asked the Ministry of Justice to review the procedure, commercial courts and enforcement laws (clauses 8 and 9) [1]. A new Enforcement Law has since been issued and applies from 28 October 2026 [6].

The reliable copy is the Bureau of Experts page, which offers the text, a print view and the original document; its page lists the text in Arabic [1]. The decree is also on the Umm Al-Qura site [2]. Commentaries and compiled PDFs can help with explanation, but check any article against the official text before you rely on it.

Your next step

Before you sign or enforce a contract, check four points against the law: how and when it can be terminated, whether it has an agreed-damages clause and how a court may adjust it, which limitation period applies to your claim, and what written proof you hold. For software and digital-project contracts, our guide to choosing an app development company in Saudi Arabia lists the questions to settle before signing.

Law firms that track many contracts and claims can record each matter's limitation dates and deadlines in Rushd by O AI, our law-firm software. Once a case is decided, the appeal deadline guide explains the time left to object.