Construction projects are often subject to unpredictable circumstances that may hinder or even render a party’s performance impossible. Under Saudi Arabia’s Civil Transactions Law (Civil Code), articles 110, 476, and 477 provide legal mechanisms to address such situations, ensuring fair outcomes for the affected parties. These provisions determine when a contract can be terminated due to impossibility and outline the legal consequences of such termination.

Impossibility of Performance

Total Impossibility and Contract Automatic Termination

Art. 110(1) provides that if an obligation becomes “wholly” impossible due to circumstances beyond a party’s control, both the obligation and its corresponding obligations are extinguished, leading to automatic contract termination. For example, if a construction site is discovered to contain significant archaeological findings, making construction permanently impossible, the contract would be terminated under this provision.

Partial Impossibility and Contract Adjustments

Where an obligation becomes partially impossible, Art. 110(2) allows for the termination of only the affected part of the contract while keeping the remaining obligations intact. For instance, if hazardous subsurface conditions affect only part of a construction project, the contractor and employer may be relieved of their obligations concerning that section while continuing the rest of the contract. The employer may request full contract termination, but the court has discretion to reject such a request if the affected portion is insignificant to the overall contract.

Impossibility and Emergency Excuse in Muqawala Contracts

Emergency Excuse

Art.476 allows either party to request contract termination due to an “emergency excuse.” However, the requesting party must compensate the other party for any damages resulting from the termination.

Contractor’s Rights

If a contractor starts work but later becomes incapable of completing it due to reasons beyond their control, Art. 477 entitles them to compensation for the work completed and expenses incurred, up to the value of the benefit received by the employer. If the completed work is defective or requires costly repairs, the compensation may be reduced accordingly.

Suspension of Performance Due to Corresponding Obligations

Art.114 establishes the principle of reciprocity in contractual obligations. If one party fails to fulfill its contractual duty, the other party may suspend its own performance. For example, if an employer fails to obtain necessary governmental approvals for a construction project, the contractor may suspend its work until the approvals are secured. However, wrongful suspension may expose the suspending party to liability for resulting delays.

Conclusion

The Saudi Civil Code provides comprehensive legal protections for construction projects facing unforeseen challenges. Articles 110, 476, 477, and 114 ensure fair contract adjustments, allowing for termination or suspension of obligations when performance becomes impossible. Understanding these provisions is crucial for construction professionals to navigate contractual risks effectively.