Contract law in Saudi Arabia

Contract Law of Saudi Arabia
Legal System
Hanbali School of Sharia Law, Sunni
Sources of Law
Quran Sunna Ijma Qiyas
Sharia Principles of Contract Law
Riba Gharar
World Bank Enforcing Contracts Data (2010)[1]
Enforcing Contracts Ranking: 140th out of 183 economies Average Number of Procedures: 43 Average Time Taken: 635 days Average Cost: 27.5% of claim, (20% attorney cost, 7.5% court cost)
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Contract law in Saudi Arabia is governed by the conservative Hanbali school of Sharia law, which adopts a fundamentalist and literal interpretation of the Quran.^[2] Any contract that is not specifically prohibited under Sharia law is legally binding, with no discrimination against foreigners or non-Muslims.

The Hanbali school is the most liberal among the four Sunni schools with respect to the freedom of persons to contract.^[3] However, the degree of freedom of contract is governed by the prohibitions in the Quran, and two distinctive doctrines in Sharia law: riba (usury) and gharar (speculation).

Unlike other Sharia law jurisdictions, Sharia law remains uncodified in Saudi Arabia due to the strong literalist view of the Hanbali school. There is also no established case reporting in the courts. This has led to much uncertainty and variation in court decisions. Despite being the world's 11th easiest economy to do business in, Saudi Arabia ranks 140th out of 183 economies in terms of enforcement of contracts. (see below: Appendix)

In 2007, King Abdullah initiated legal reforms to modernise the courts and codify Sharia law in Saudi Arabia. The ulama, the religious body, approved a codification of Sharia law in 2010, and a sourcebook of legal principles and precedents was published on January 3, 2018. (see below: Legal Reform)