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The Saudi Civil Transactions Law (SCTL) provides a comprehensive legal framework to regulate civil and contractual relationships in the Kingdom of Saudi Arabia. It codifies Shariah principles and applies to most civil transactions unless there is a specific law governing a particular area. SCTL was enacted last December 15, 2023 and is part of Saudi Vision 2030. At Construction Management Associates, we have become intimately familiar with the SCTL through our involvement in numerous contract administration and claims engagements on large projects in Saudi Arabia. We review client contracts and highlight provisions that may be deemed invalid if they violate the law. In such cases, the courts may annul the specific provision without invalidating the entire contract, particularly in commercial contracts. On one occasion, we supported a prominent developer working on a major project in Jeddah who sought to review the contract terms and determine whether they are enforceable in case of disputes before the courts. Additionally, we have used the provisions of the SCTL while handling claims for compensation related to project delays for contractors, especially for public works projects where the Government Tenders and Procurement Law (GTPL) does not explicitly address such claims. At Construction Management Associates, we have carried out a detailed comparative analysis of both SCTL and GTPL laws, in both Arabic and English, copies of which can be made available upon request. By relying on the provisions of the SCTL, we provide a practical contractual and legal solution, offering a faster way to resolve disputes early. This law has become the foundation for many courts to rely on since the year 1444 AH, therefore, it is inevitable to apply this law when resorting to the courts in the event of disputes in construction projects, whether public or private. Below is an overview of the SCTL: General Contractual Principles• Offer and Acceptance: Contracts are formed based on mutual consent expressed through an offer by one party and acceptance by the other. • Conditions for Validity: Contracts must meet specific criteria, including: • Freedom of Contract: Parties can negotiate terms unless they conflict with mandatory legal provisions or public policy. Coverage of Different ContractsThe SCTL governs various types of contracts and relationships: • Sales Contracts: Defines the rights and obligations of buyers and sellers, such as the transfer of ownership and payment. • Leases: Regulates landlord-tenant relationships, including rent payment and property usage. • Construction Contracts (Muqawala): Outlines the responsibilities of contractors and clients, including quality assurance, decennial liability, and delivery obligations. • Agency and Representation: Covers the delegation of authority and responsibilities between agents and principals. Remedies and Dispute Resolution• Remedies for Breach: Offers options like compensation, contract rescission, or specific performance in cases of default. • Force Majeure: Allows exemption from liability when unforeseen events prevent contract performance. • Statute of Limitations: Sets time limits for filing claims to ensure timely resolution. Liability and Obligations• Decennial Liability: For construction projects, contractors and engineers are jointly liable for 10 years for structural defects unless otherwise agreed. • Tort Liability: Addresses civil wrongs and compensation for harm caused by negligence or misconduct. Application to Public Works and Commercial Contracts• Public Works: Applies to government contracts unless overridden by specific regulations for public procurement. • Commercial Contracts: While primarily civil, some commercial contracts may still adhere to the principles of the SCTL where commercial laws do not provide specific rules. Overarching Principles• Good Faith: All transactions must be executed in good faith, ensuring fairness and transparency. • Custom and Practice: Allows the use of local or industry-specific customs to interpret or supplement contracts. • Public Policy: Prohibits contracts that contravene public morals or policy. Comparison between SCTL and GTPLAt Construction Management Associates, we have carried out a detailed comparative analysis of both SCTL and GTPL laws, in both Arabic and English, copies of which can be made available upon request. Contact us to learn more.
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