Middle East conflict will not necessarily trigger force majeure in Saudi contracts

A force majeure clause relieves a company of some of its liabilities when circumstances beyond its control prevent it from fulfilling its contractual obligations. A common feature of force majeure clauses is that they are defensive, allowing for additional time to be granted for the performance of an obligation, hereby removing liability for delay, without providing an entitlement for additional costs.

Below, we look at different ways recent events linked to the conflict between Iran and Israel/the US might be categorised under Saudi law – and the implications that has for the scope of businesses to claim relief under related contracts.

The Civil Transactions Law

Under the Saudi Civil Transactions Law (CTL), war-related events could constitute force majeure, ‘exceptional circumstances’, or be governed by other provisions specific to construction contracts.

Under Saudi law, there is no blanket rule that war automatically qualifies as force majeure. Instead, courts assess each case on its own facts, having regard to the nature of the event, its foreseeability, its causal impact on performance, and the contractual framework agreed between the parties. The distinction between force majeure and exceptional circumstances is particularly important, as each doctrine produces materially different legal consequences. 

Exceptional circumstances

Exception events are governed by Article 97(1) of the CTL. It provides, “in case of extraordinary events which were unforeseeable at the time of contracting and which make the fulfilment of a contractual obligation excessively onerous on the part of the debtor in such a way that it may cause heavy losses, the debtor may, without undue delay, invite the other party to negotiate”.

This doctrine applies where performance remains possible, but has become excessively burdensome, threatening severe loss and disturbing the contractual equilibrium. There are, however, three important things to consider: 

• the debtor cannot unilaterally suspend or terminate performance; 
• the primary remedy is renegotiation, failing which the court may intervene; and 
• the court’s power is limited to reducing the obligation to a reasonable level, not extinguishing it altogether. 

Exceptional circumstances are a matter of public policy under Saudi law. Article 97(4) CTL expressly provides that, “any agreement contrary to the provisions of this Article shall be deemed null and void”. Accordingly, parties cannot contract out of Article 97, nor can they pre‑allocate the risk of exceptional circumstances in a manner that defeats its application. 

Force majeure

Force majeure is addressed under Article 110 of the CTL.

Article 110 provides, “if the performance of an obligation in a bilateral contract becomes impossible for a reason beyond the debtor’s control, said obligation and the corresponding obligation shall be extinguished, and the contract shall be automatically terminated”. It adds that, “if only part of the obligation is impossible to perform, the obligation shall be extinguished only for such part and its corresponding obligation. Such provision shall apply to temporary impossibilities in time-based contracts. The creditor may, in either case, demand termination of the contract. The court may dismiss the petition for termination if the part is insignificant compared to the obligation”. 

The defining feature of force majeure under Saudi law is objective impossibility, not mere hardship. Where performance is rendered impossible: 

• the affected obligation is extinguished; 
• the corresponding obligation of the counterparty is likewise extinguished; and 
• the contract is automatically terminated by operation of law, subject to partial or temporary impossibility rules. 

Unlike exceptional circumstances, force majeure is not a mandatory rule of public policy. Article 174 of the CTL allows parties to contractually allocate the consequences of force majeure, including agreeing that “the effects of force majeure be borne by the debtor”. This means that where parties have included a force majeure clause in their contract, that clause should take precedence.

Classification of war and armed conflict under Saudi law 

Saudi courts have historically accepted that war and armed conflict may constitute force majeure, but only where the legal thresholds are satisfied.  Saudi administrative courts have also recognised war as force majeure in certain circumstances. In this regard, the Administrative Court (Board of Grievances) exempted a contractor from delay penalties imposed by the Ministry of Education on the basis that the Gulf War constituted a force majeure event.  

Similarly, in another case, the court exempted a company from penalties, considering, among other grounds, the Lebanese Civil War, notwithstanding the argument raised by the authority that the war was known and foreseeable prior to contract execution. 

These precedents indicate that Saudi courts have accepted wars as force majeure events where they were found to be external to the parties, beyond their control, and to have a direct effect on the ability to perform contractual obligations. 

Importantly, where a contract contains an express force majeure clause, Saudi courts have shown a clear tendency to give effect to the parties’ agreement. In this respect, one judgment issued by the Administrative Court in Riyadh (Third Commercial Circuit) confirms that the court adhered to the force majeure provisions as agreed between the parties. 

Application to the Middle East conflict

Whether the current conflict and its impact on the KSA constitutes force majeure or an exceptional circumstance cannot be determined in the abstract. The classification depends on a range of factors. These include:

• the factual impact of the conflict on the specific contractual obligations, for example physical access, supply chains, regulatory shutdowns; 
• whether performance has become impossible or merely excessively onerous; 
• the foreseeability of the event at the time of contracting; and 
• the presence and wording of any force majeure or risk‑allocation clauses. 

Where the impact of the conflict renders performance objectively impossible – such as through closure of ports, destruction of works, or legal prohibitions – Article 110 of the CTL is likely to apply, subject to contractual modification. Conversely, where performance remains possible but economically ruinous, Article 97 of the CTL may apply, triggering renegotiation rather than termination. 

Specific relief available under construction contracts

Some provisions in the CTL are specific to work contracts, which includes construction contracts. These provisions are not mandatory but parties to construction contracts can agree that they should govern their agreement and, alternatively, they may be argued to apply should there be ambiguity in the contract or if an issue is not addressed at all.

While Article 471(1) generally prohibits contractors that agreed to lump sum contracts from raising claims for additional fees, even where material prices increase, Article 471(3) provides a crucial exception.

According to Article 471(3), “if there is any disruption to the balance of contractual obligations of both the client and the contractor due to general exceptional circumstances that could not have been anticipated at the time of concluding the contract, and the basis upon which the estimate was determined becomes no longer valid, the court may, upon consideration of the circumstances and the interests of the parties, order restoration of the contractual balance, including extending the execution period or increasing or decreasing the fees, or it may order termination of the contract”.

Article 471(3) therefore offers contractors some scope to claim that a war-related event entitles them to specific remedies such an extension of time or adjustment of the contract price.

Actions for businesses 

Saudi law draws a principled and consequential distinction between force majeure and exceptional circumstances. A war-related event may fall into either category depending on its legal effect, not merely its existence. The correct classification carries profound consequences for contractual survival, liability, and judicial intervention. 

Parties operating in Saudi Arabia must assess war‑related risks holistically, combining factual causation, contractual drafting, and statutory doctrine. Courts will not assume force majeure lightly, nor will they permit parties to evade the mandatory protections embedded in Article 97 of the CTL. 

Ultimately, even if force majeure applies, parties will need to take a commercial view as to whether to claim under those clauses. This is because most force majeure clauses do not allow for the recovery of costs incurred owing to force majeure. They only allow for an extension of time for performance of their contractual obligations. As a result, a party needs to consider carefully whether triggering contractual force majeure is the most optimum option for their specific circumstances.