In brief
Recent geopolitical developments and ongoing market conditions in KSA have prompted extensive focus on the availability and scope of force majeure (FM) relief under Saudi law. Parties to contracts governed by Saudi law are increasingly assessing whether, and to what extent, unforeseen events may affect contractual performance, risk allocation, and enforcement.
This alert outlines the key factors relevant to FM claims under Saudi law and highlights practical issues that contracting parties should keep in consideration when assessing their position.
In more detail
Legal framework
Unlike some jurisdictions, FM under Saudi law was historically not governed by a single codified regime. Instead, it was informed by contractual terms, general legal principles, and Sharia‑based doctrines applied by Saudi courts on a case‑by‑case basis, with relief depending heavily on the specific facts, the nature of the event, and its impact on contractual obligations.
FM is now expressly recognised and codified under Article 125 of the Civil Transactions Law1, which provides that a person shall not be liable for harm caused by a reason beyond their control, such as FM, unless otherwise agreed. The doctrine remains rooted in Sharia principles and may be applied even in the absence of an express FM clause; however, the threshold for invoking FM is high, and the burden of proof rests with the claimant.
Scope and requirements
There is no exhaustive list of FM events; rather, courts assess the specific circumstances of the event in question. In practice, FM requires (i) an unanticipated event; (ii) beyond the party’s control; and (iii) impossible to prevent or remove, which renders contractual performance objectively impossible.
Anticipation is assessed strictly, by reference to a hypothetical highly perceptive person. Saudi courts apply the doctrine narrowly: mere difficulty, non-commerciality, or financial loss will not suffice, and diminished revenues are generally viewed as part of ordinary business risk.
Assessment
While FM may theoretically apply to payment obligations, meeting the impossibility threshold is difficult where payment remains technically possible. Saudi courts also consider the duration of the event, the term of the contract, and whether alternative solutions (such as renegotiation) were available. Given the lack of binding precedent, courts enjoy broad discretion in assessing FM in specific contexts.
Remedies
Remedies for a FM event depend on the nature of the contract and the duration and impact of the event. Temporary FM may justify suspension of performance without breach, while prolonged events (such as war) may support termination. Courts may nevertheless award compensation where a party has relied on the contract to its detriment, and a party that wrongly invokes FM may be liable for wrongful termination and resulting damages.
Notice
In general, notice should be given within a reasonable time after the occurrence of the FM event. However, it is important to note that what a court would deem as a reasonable time may vary depending on the nature of the event. On the other hand, a court may require speedy notice in cases where notification could have induced the other party to undertake remedial actions and thus mitigate damages. Failure to give notice under these circumstances would likely be taken into consideration as a factor in assessing the strength of the FM claim.
Related doctrine: state of emergency
In addition to FM, Saudi courts may apply the Sharia‑based doctrine of state of emergency, which allows courts to excuse or modify contractual performance where performance remains possible but would cause severe and exceptional hardship due to unanticipated and unavoidable circumstances. Unlike FM, this doctrine applies where compelling performance would fundamentally upset the contractual balance, such as where external measures materially prevent a party from benefiting from the agreement. Courts have broad discretion to suspend, adjust, or terminate obligations, but relief is granted only where hardship exceeds ordinary business risk, and parties invoking the doctrine bear the risk of liability if relief is ultimately found unjustified.
How can Baker McKenzie contribute to assisting their clients?
Our Dispute Resolution team can support businesses facing contractual issues in KSA arising from unforeseen events, including:
- Reviewing contracts to assess risk allocation, hardship clauses, and exposure.
- Determining whether FM or exceptional circumstances may apply.
- Advising on strategies for contract renegotiation.
- Representing clients in disputes involving non-performance, delays, or hardship.
We would be pleased to discuss how these matters may affect your business and provide tailored advice.
For further assistance, please contact the key team members.
1 “A person shall not be liable for harm the cause of which is established to have been for a reason beyond his control, such as force majeure or a fault committed by a third party or the aggrieved party, unless agreed otherwise.”
Aseel Ali, Associate, has contributed to this legal update.