When exercising legal rights on projects might be unlawful in Saudi Arabia

If a business abuses its rights in a way that causes harm to another party, it could be liable to others under civil law in the Kingdom of Saudi Arabia (KSA).

The unlawful abuse of rights doctrine is codified in the Civil Transactions Law (CTL) in the KSA. Below, we look in more detail at what the CTL says and at how the Saudi courts have interpreted its requirements.

Unlawful abuse of rights: insights from KSA law

Article 29 of the CTL codifies the unlawful abuse of rights principle. It provides that a right may not be abused. It further specifies cases that constitute an abuse of a right. Those cases are: if the use of the right is intended solely to cause harm to others; if the benefit from its use is absolutely disproportionate to the harm suffered by others; or if it is used for other than its lawful purpose or for an unlawful purpose.

Article 29 is framed by article 720 of the CTL, which establishes a set of general principles applicable to all matters governed by the CTL. Among these principles are maxims, including: “harm shall not be repelled by harm”; “a harm may not be remedied by the commission of an equivalent harm”; and “harm shall be removed to the extent possible”.

The language used in article 29 is substantially consistent with the provisions of the civil transactions laws of Jordan and the UAE. However, the KSA CTL expressly omits the reference to “violation of norms and traditions” as a condition stipulated in those comparative provisions.

What the Saudi courts have said about what constitutes an unlawful abuse of rights

The unlawful abuse of rights doctrine in the context of construction projects has only twice been substantively considered by the Saudi courts.

In 2020, the commercial court in Riyadh examined what could constitute an abuse of rights in the context of construction. In that case, the court considered that a party was entitled to compensation owing to another party’s conduct – it cited the “abusive withdrawal” of projects, delays in communication, and failure to pay what was the other party’s “established right” as causing the other party damage, constituting an abuse of right. The case demonstrates that even if there is a lawful right to withdraw from a project, if this right is used abusively, the party could be obliged to compensate the harmed party for the damages caused.

In 2024, the commercial court in Medina examined in more detail what could constitute an unlawful abuse of rights. It confirmed that the “conclusive evidence” of the intent to harm is required to substantiate claims of unlawful abuses of rights in the KSA. In the case before it, the court rejected claims that a party had pursued litigation “for purposes other than those for which litigation was legislated, which is to resolve disputes and enforce them”, implying that if a party can show harmful intent in how the other side litigates, it might constitute an unlawful abuse of harm in the KSA.

The standards for determining abuse of rights

Business’ understanding of what might constitute an unlawful abuse of rights in the KSA can be informed by an analysis of the work of Abd al-Razzaq al-Sanhoury, a pre-eminent Arab jurist who is regarded for his contributions to modern Arab law, particularly the Egyptian Civil Code of 1948. His work, The Sanhoury Code, and the Emergence of Modern Arab Civil Law, is a comprehensive commentary on the Egyptian Civil Code and is considered the standard reference for civil law in the Arab world.

According to Al-Sanhoury’s academic work, which is considered the standard reference for civil law in the Arab world, when someone abuses their rights, it is considered a fault that requires compensation, which can be either monetary or in any kind. It is enough, he said, for that liability to exist within civil law regimes – it need not be provided for in contracts.

Al-Sanhoury’s view was that, when exercising rights, the right holder must adhere to the customary behaviour of an ordinary person. Any deviation from that behaviour, even if within the limits of the right, is considered a fault that establishes liability. This deviation is recognised as a fault if it falls into one of the following categories:

• intent to harm: this corresponds to intentional fault;
• significant imbalance between harm and benefit: this corresponds to gross negligence;
• unlawful interest: this corresponds to non-gross negligence.

Al-Sanhoury said: “Intentional fault and gross negligence are identical in both forms of fault: abuse of rights and exceeding the limits of rights or licenses. As for non-gross negligence, in exceeding the limits of rights or licenses, it is seen as any deviation from the customary behaviour of an ordinary person. In the case of abuse of rights, deviation only occurs if the right holder aims to achieve an unlawful interest. Therefore, non-gross negligence in abuse is narrower than in exceeding the limits of rights or licenses. This is due to the legal provisions that have narrowed the scope of abuse. This limitation may be justified by the fact that the form of fault in abuse is a newly introduced concept, hence the reluctance to expand it.’’

Abuse of rights in the context of contracts

In contractual relationships, parties agree on the scope and limits of their rights. Therefore, in theory, a party cannot exceed those rights in a way that would constitute an abuse, since the contract itself defines and restricts those rights. If a party acts contrary to the agreed terms, it would typically be considered a breach of contract, rather than an abuse of right. An exception might be found in administrative contracts, where the parties are not on equal footing and the administrative authority may, in theory, abuse its contractual powers.

In contractual contexts though, the doctrine of abuse of right is often framed as a breach of good faith. As a result, if a party does not breach the contract per se but executes its terms in an abusive or unlawful manner, this could amount to a breach of the duty of good faith. This is reflected in article 95 of the CTL.

Article 95 provides that contract shall be executed in accordance with its terms and in a manner consistent with the requirements of good faith. It further provides that the contract shall not be limited to binding the contracting party to its terms, but it shall also include its requisites in accordance with the statutory provisions, custom, and the nature of the contract.

Those provisions appear consistent with Al-Sanhoury’s view and with how the doctrine is applied in practice.