{"id":145847,"date":"2026-06-15T02:37:40","date_gmt":"2026-06-14T23:37:40","guid":{"rendered":"https:\/\/www.salamahlaw.com\/?p=145847"},"modified":"2026-06-15T02:39:50","modified_gmt":"2026-06-14T23:39:50","slug":"compensation-under-the-saudi-civil-transactions-law","status":"publish","type":"post","link":"https:\/\/www.salamahlaw.com\/en\/compensation-under-the-saudi-civil-transactions-law\/","title":{"rendered":"Compensation Under the Saudi Civil Transactions Law"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The concept of compensation was far from absent in Saudi courts prior to the Civil Transactions Law. Sharia principles, combined with decades of judicial practice, have long upheld a clear rule:<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span> <b>Whoever suffers harm deserves to have it remedied, and the remedy must match the actual harm incurred.<\/b><\/p>\n<p><span style=\"font-weight: 400;\">However, this principle\u2014despite its deep roots\u2014was scattered across various legal sources and judicial interpretations. With the rapid expansion of commercial activity in Saudi Arabia, especially in cities like Riyadh and Jeddah, and with the increasing complexity of business risks, the need to codify this principle into a unified, modern legal framework became urgent.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Civil Transactions Law provides precisely that: a cohesive statutory structure that elevates compensation from a narrowly applied doctrine\u2014typically associated with individual tort liability\u2014to a comprehensive system addressing all contractual and commercial relationships where liability for fault may arise.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Codification Does Not Mean Creation: An Old Principle in a New Legal Form<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Contrary to what some may assume, the principle of compensation did not \u201cbegin\u201d with the new law. Courts have long applied it rigorously\u2014requiring the party at fault to restore the injured party to their prior position and awarding compensation strictly according to the actual harm, not hypothetical or inflated sums.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What is new, however, is that this principle is now embedded within a unified statutory framework\u2014expanding its reach from purely material harm to a broader spectrum including moral damages, lost profits, and contractual breaches across commercial dealings.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Articles 120\u2013140: The Modern Structure of Liability in the Civil Transactions Law<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The law introduces a more precise and stringent architecture for civil liability. Compensation now requires:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">proof of fault<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">proof of harm<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">proof of causation<\/span>&nbsp;<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">In addition, compensation may include actual losses <\/span><i><span style=\"font-weight: 400;\">and<\/span><\/i><span style=\"font-weight: 400;\"> lost profits, provided they result directly from the liable party\u2019s fault.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Of particular importance to business owners is <\/span><b>Article 136<\/b><span style=\"font-weight: 400;\">, which sets the standard for compensation:<\/span><\/p>\n<p><b>\u201cRestoring the injured party to the position they were in\u2014or would have been in\u2014had the harm not occurred.\u201d<\/b><\/p>\n<p><span style=\"font-weight: 400;\">This represents a significant shift. It empowers courts to consider not only existing losses but also the <\/span><i><span style=\"font-weight: 400;\">economic position<\/span><\/i><span style=\"font-weight: 400;\"> the injured party reasonably would have reached\u2014an essential consideration in commercial sectors affected by supply chain disruptions, halted projects, or breached long-term agreements.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, <\/span><b>Article 138<\/b><span style=\"font-weight: 400;\">, which expressly recognizes compensation for moral (non-material) harm, marks a major development\u2014especially in an era where a company\u2019s brand value depends heavily on trust, reputation, and market perception. Although courts previously hesitated to grant moral damages, codification now paves the way for a more mature judicial approach to reputation-related harm.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Between Theory and Practice: How Will the Courts Apply These Rules?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Ultimately, it is the judiciary that brings legal texts to life. Historically, Saudi courts have approached compensation conservatively, granting it only when:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">harm is clearly proven<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">fault is certain<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">causation is direct and unambiguous<\/span>&nbsp;<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This cautious approach is expected to continue, consistent with the principle that compensation is not a <\/span><i><span style=\"font-weight: 400;\">penalty<\/span><\/i><span style=\"font-weight: 400;\"> but a <\/span><i><span style=\"font-weight: 400;\">restoration mechanism<\/span><\/i><span style=\"font-weight: 400;\"> aimed at rebalancing\u2014not enriching\u2014either party.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The law also preserves long-standing doctrines from Sharia and jurisprudential practice, such as reducing compensation where the injured party contributed to the harm\u2014an established principle in Islamic jurisprudence and now a general rule of civil liability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additionally, the wide discretion granted to courts in assessing moral damages allows judicial precedents to develop gradually, ultimately shaping a uniquely Saudi standard for evaluating non-material harm in commercial contexts.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>Why This Matters for Business Owners<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Modern business environments no longer rely solely on contractual strength; they depend on the legal risks surrounding every commercial interaction. The new law places commercial relationships squarely within the framework of civil liability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Examples of conduct that may give rise to compensation include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">repeated delivery breaches<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">delayed payments<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">harming a business partner\u2019s reputation<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">project collapse due to one party\u2019s non-performance<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">supply chain disruption<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">loss of expected profits<\/span>&nbsp;<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Business owners who once believed that \u201cthe worst outcome is contract termination\u201d now realize that liability may extend far beyond termination\u2014to substantial financial compensation where direct harm is proven.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Conversely, injured parties now wield stronger tools for recovering losses\u2014because the law does not require intent or bad faith; fault, harm, and causation are sufficient.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>A New Era Under the Civil Transactions Law<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">What distinguishes the Civil Transactions Law is not merely its modern drafting, but its successful integration of:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the authenticity of Sharia-based harm-remedy principles<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">modern civil-law doctrines of liability<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">comparative legal experience<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">the practical needs of a rapidly growing national economy<\/span>&nbsp;<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The law has shifted compensation from being a \u201cjudicial exception\u201d to a \u201cstatutory rule,\u201d making accountability central to commercial stability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a result, business parties must now approach their commitments with greater discipline: contracts are no longer just words\u2014they carry significant financial consequences.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Between long-established jurisprudential principles and a contemporary legal framework, Saudi Arabia is shaping a sophisticated modern doctrine of civil liability\u2014one that will redefine risk, commercial behavior, and the expectations of companies across the Kingdom.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><b>FAQs<\/b><\/h2>\n<h3><b>What are the conditions for compensation under Saudi law?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Fault, harm, and direct causation.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>Can moral (non-material) harm be compensated under Saudi law?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Yes. Article 138 of the Civil Transactions Law expressly allows compensation for moral damage.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>What is the time limit for filing a compensation claim?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Ten years from the date the harm occurred.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"> However, claims arising from a harmful act are barred after <\/span><b>three years<\/b><span style=\"font-weight: 400;\"> from the injured party\u2019s knowledge of the harm and the responsible person.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"> For claims arising from a criminal act, they remain admissible as long as the criminal case is admissible.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>When does the right to claim compensation expire?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Ten years after the injured party becomes aware of the harm.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>Conclusion<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Compensation disputes require specialized legal expertise. Do not take any action before consulting a professional.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span> <a href=\"https:\/\/api.whatsapp.com\/send\/?phone=966533336845&amp;text&amp;type=phone_number&amp;app_absent=0\" target=\"_blank\" rel=\"noopener nofollow\"><b>Book a confidential and specialized consultation now<\/b><\/a><span style=\"font-weight: 400;\"> with <\/span><b>AlSalama Law Firm<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The concept of compensation was far from absent in Saudi courts prior to the Civil Transactions Law. Sharia principles, combined with decades of judicial practice, have long upheld a clear rule: Whoever suffers harm deserves to have it remedied, and the remedy must match the actual harm incurred. However, this principle\u2014despite its deep roots\u2014was scattered&#8230;<\/p>\n","protected":false},"author":34,"featured_media":145845,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[101,26],"tags":[],"class_list":["post-145847","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-arbitration-dispute-resolution","category-general-articles"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/posts\/145847","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/users\/34"}],"replies":[{"embeddable":true,"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/comments?post=145847"}],"version-history":[{"count":3,"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/posts\/145847\/revisions"}],"predecessor-version":[{"id":145851,"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/posts\/145847\/revisions\/145851"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/media\/145845"}],"wp:attachment":[{"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/media?parent=145847"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/categories?post=145847"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.salamahlaw.com\/en\/wp-json\/wp\/v2\/tags?post=145847"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}