The construction industry in Saudi Arabia faces increasing exposure to global economic fluctuations and unforeseen events. The Saudi Civil Transactions Law (Civil Code) includes articles 97 and 471(3), which provide relief for parties burdened by extraordinary circumstances beyond their control. These provisions ensure that contractual obligations remain fair and balanced in the face of unexpected challenges.

Relief from Exceptional Circumstances of a General Character

Art. 97 applies when an exceptional, unforeseeable event threatens to impose excessive hardship on a party. This provision is mandatory, meaning that contractual clauses attempting to override it are invalid. The circumstances must affect the general public or a broad sector rather than just the contracting parties. For example, if a war causes a significant increase in the price of construction materials, a party may seek relief under Art. 97 by proving:

• The war had a global impact, not just a localized effect on the country which the material will be sourced
• How the war increases the material’s price
• Why the party still continuing to import the material at the inflated price
• Why the war was not foreseeable at the time of entering the contract

In this case, a party may seek to renegotiated the burdensome contractual term with his counterparty. If negotiations fail, a court can adjust the contractual obligation to restore fairness, potentially redistributing costs between the parties.

Rebalancing Contractual Obligations in Muqawala Contracts

Art.471(3) applies when an exceptional circumstance significantly disrupts the financial balance of a contract, particularly in construction agreements. It allows courts to intervene and restore fairness and contractual balance by modifying contractual terms.

A court may provide relief by:

• Granting an extension of time.
• Adjusting contract prices (increase or decrease).
• Or ordering contract termination if necessary.

Unlike Art. 97, Art.471(3) does not require parties to attempt renegotiation before seeking court intervention. However, it is not a mandatory provision, meaning that parties can exclude its application through contractual terms.

Conclusion

Saudi Arabia’s Civil Code provides essential legal mechanisms to address exceptional and unforeseeable circumstances in construction contracts. Articles 97 and 471(3) offer pathways for contract adaptation, ensuring fair risk distribution. Construction professionals must be aware of these provisions to protect their contractual interests in volatile market conditions.