Introduction: The Importance of Construction Contracts as a Development Pillar of Vision 2030

Construction contracts are among the most essential pillars of the construction sector in the Kingdom of Saudi Arabia. They form the framework upon which infrastructure, housing, and mega-projects—accelerating under Vision 2030—are built.
Because these contracts are linked to multiple regulations—such as the Civil Transactions Law, Labor Law, Saudi Building Code, and Arbitration Law—they are considered among the most complex and sensitive contracts in terms of responsibilities and risk allocation.

This article aims to provide a comprehensive analysis of the legal framework governing construction contracts in the Kingdom, highlighting obligations, guarantees, and the regulatory mechanisms for resolving related disputes.

First: The Legal Framework Governing Construction Contracts

Construction contracts in Saudi Arabia are subject to a set of regulations, the most important of which are:

1. Civil Transactions Law (Contract Law)

It provides the general framework that defines contract elements, obligations, contractual liability, and termination cases.

2. Regulations Governing Government Contracting Entities

Such as government contracts, tendering systems, and the executive regulations of each entity.

3. Saudi Building Code (SBC)

Now mandatory for all buildings and facilities, and considered an integral part of legal and technical obligations.

4. Arbitration Law and Law of Civil Procedures

As the primary reference for dispute resolution, especially in technically complex construction projects.

Second: Contractor Obligations and Legal Liability

The contractor bears essential responsibilities designed to ensure quality and structural safety:

1. Commitment to Execution According to Specifications and Agreed Timeline

  • The project must be delivered according to plans, technical specifications, and approved standards.

  • Delays may result in penalties deducted from the contractor’s entitlements.

  • The owner may terminate the contract in cases of material breach.

2. The Ten-Year Warranty – Extended Liability

One of the most significant legal guarantees:
The contractor and supervising engineer are jointly liable for ten years for:

  • Any total or partial collapse of the building

  • Any defect that threatens the structure’s safety

Even if caused by soil defects or execution faults.

This liability cannot be waived, confirming its mandatory nature for public safety.

3. Compliance with the Saudi Building Code (SBC)

Including structural safety, fire requirements, electrical and mechanical standards, energy efficiency, and sustainability.
Non-compliance is considered a contractual and technical breach.

Third: Owner (Employer) Obligations

In return, the owner has essential obligations that ensure smooth project progress:

1. Site Handover and Preparation

The site must be delivered free of obstacles and with necessary permits.

2. Timely Payment of Financial Dues

  • Payments must be made in installments or based on progress.

  • Unjustified delay allows the contractor to:

    • Stop work

    • Claim compensation

    • Terminate the contract

3. Cooperation and Providing Information

Such as supplying technical documents or governmental approvals.

Fourth: Risk Allocation and Party Responsibilities

Risk allocation is a key feature of construction contracts:

  1. Execution risks – typically borne by the contractor

  2. Price fluctuation risks – often regulated in special clauses

  3. Force majeure risks – such as natural disasters or sudden governmental decisions

  4. Design risks – responsibility depends on who prepared the design

Fifth: Dispute Resolution Mechanisms in Construction Contracts

Given the complexity of construction disputes, several mechanisms exist:

1. Commercial Arbitration

The most common, characterized by:

  • Speed

  • Confidentiality

  • Ability to appoint experts in engineering and law

  • Suitability for large projects

2. Dispute Adjudication Boards (DABs)

Common in international FIDIC contracts, providing:

  • Immediate dispute resolution

  • Reduced project disruption

  • Less need for arbitration or courts

3. Litigation (Courts)

Still an option for certain contracts, especially government ones.

Conclusion: Toward a Safer and More Transparent Contracting Environment

The legal regulation of construction contracts in the Kingdom reflects a clear vision toward:

  • Protecting public interest

  • Ensuring construction quality

  • Enhancing transparency and discipline

  • Achieving balance between owner and contractor rights

With the enforcement of the Saudi Building Code and activation of arbitration and dispute boards, the sector has become more mature and capable of meeting the demands of major development projects in line with Vision 2030.