Supply of Services: Overview (Saudi Arabia)

Buying and supplying services outside of one’s jurisdiction is a daunting task, as the number of topics to consider can seem overwhelming. The scope of services included in supply of services contracts can also vary significantly, from one-time consulting engagements and ongoing services projects to multi-jurisdictional outsourcing transactions.

This Practice Note provides an overview of key considerations when drafting or negotiating business-to-business (B2B) supply of services contracts in Saudi Arabia, regardless of the services involved. It includes important legal and contractual issues that frequently arise and common remedies available to the parties in supply of services contracts.

Legal framework and governing principles

• The primary legal framework for services contracts under the Civil Transactions Law (CTL), including the CTL’s provisions governing contracts for service (muqawala).
• Practical considerations for online service providers under Saudi e-commerce rules.
• Cross-border touchpoints, including mixed goods/services arrangements and the potential relevance of international standard terms.

Language, standard terms, and contract structure

• Court-facing documentation requirements (Arabic) and practical approaches for bilingual contracting.
• Incorporation of standard terms and how to reduce “battle of the forms” risk using priority clauses and clear order-of-precedence drafting.

Core commercial terms in services contracts

• Key service provider obligations: scope, milestones, escalation mechanisms, compliance and approvals, staffing/qualification requirements, and alignment with customer codes of conduct.
• Service levels and typical consequences for failure (for example, service credits or liquidated damages).
• Timing and delay: “reasonable time” implications, “time is of the essence” clauses, and termination mechanics.

Risk, compliance, and regulatory clauses

• Anti-bribery and anti-corruption compliance obligations, audit rights, reporting, and termination triggers.
• Data protection and privacy considerations under the Saudi data regime, including processing bases, breach reporting, and cross-border transfer constraints.
• Competition law considerations when drafting non-compete / exclusivity-type restrictions.
• Health and safety obligations relevant to service delivery.

Price, payment, and tax

• Pricing and payment terms in line with Saudi law and Sharia principles (including the practical limitations around interest).
• Common pricing models (fixed price, time and materials, cost-plus, unit pricing) and price adjustment mechanisms for longer-term arrangements.
• Tax considerations including VAT treatment, withholding tax exposure for non-residents, and permanent establishment risk indicators.

Deliverables and intellectual property

• Defining deliverables and how implied terms may apply where specifications are not fully set out.
• Typical IP positioning and when ownership, assignment, or licensing terms should be expressly agreed.

Staffing, subcontracting, and assignment

• No automatic transfer of employees under Saudi labour rules and related contracting implications.
• Subcontracting permissibility and continuing liability for subcontracted performance.
• Assignment mechanics and when counterparty consent is required.

Liability, remedies, and dispute resolution

• Warranties, indemnities, liquidated damages and key enforceability limitations.
• Limitation/exclusion of liability—what generally works and what cannot be excluded (for example, fraud or gross negligence).
• Remedies under Saudi law (termination, damages, specific performance, injunctions) and practical mitigation expectations.
• Governing law and jurisdiction: the practical effect of Saudi court proceedings applying Saudi law.
• Arbitration and ADR options, including drafting tips that make dispute clauses more effective.

Conclusion

Well-drafted services contracts in Saudi Arabia benefit from clear scope definition, disciplined contract structure (especially around standard terms), and careful handling of payment, tax, data, and liability risk. This overview provides a helpful roadmap for both customers and service providers negotiating B2B services arrangements in the Kingdom.

To explore the full practice note, visit the Practical Law™ website.

Please contact the authors if you would like a full copy.