Contract Update: A Simple Step to Protect Your Company from Unexpected Commitments

BY Nassr Albarakati · 02 December 2025

Contract Update: A Simple Step to Protect Your Company from Unexpected Commitments

Introduction

In the fast-moving, ever-changing business environment of Saudi Arabia, contracts are not simply fixed documents. They are effective legal instruments that must be maintained and updated regularly to keep pace with the Kingdom's ongoing legislative developments. This places an obligation on companies and individuals alike to review and update their contracts, to ensure continued compliance and to avoid exposure to unforeseen legal and financial risk. Below is an overview of why regularly updating contracts matters, and the risks that periodic updates help avoid.

First: Why Contracts Need Continuous Updating in Light of Legislative Change

A contract, as a binding document, can lose part of its legal force if it is not kept up to date. The importance of updating contracts becomes clear in the following areas:

1. Ensuring compliance with current regulations and avoiding invalidity

Ongoing legislative updates can render older contractual provisions inconsistent with the laws currently in force, which may render the contract wholly or partly invalid.

Example: following the entry into force of the new Companies Law, companies became required to bring their articles of association into line with its provisions to ensure their continued validity. The Ministry of Commerce granted companies a grace period to bring their affairs into compliance.

2. Ensuring the updated statutory time limits for legal procedures are observed

Some legislative updates change the statutory time limits that must be observed when taking a particular action. Updating contracts accordingly matters because it ensures the party can still exercise the right in question within the newly established time limit.

Example: the notice period for terminating an indefinite-term employment contract has been updated to be 30 days where termination is initiated by the employee, and 60 days where it is initiated by the employer.

3. Making the most of the legal protection new legislation creates

Updating contracts is not only about avoiding violations. It also means taking full advantage of the rights that new legislation makes available.

Example: the new Evidence Law expanded the mechanisms available for using electronic evidence and digital signatures. Updating a contract to include an explicit clause recognizing the validity of dealings conducted on this basis strengthens both parties' legal position in the event of a dispute.

4. Achieving compliance with current statutory obligations and benefiting from the rights they establish

Updating contracts also matters because it ensures compliance with current statutory obligations, and allows parties to benefit from rights that may not have existed under the previous legislation. Some legislative updates impose new procedural requirements on companies, introducing new mandatory provisions accompanied by penalties for non-compliance.

Example: recent updates to the Labor Law introduced new provisions affecting both employers and employees, including the regulation and formalization of resignation, an extended notice period for terminating indefinite-term contracts, and other provisions.

5. Keeping pace with judicial precedent and commercial practice

Judgments issued by the courts, and the principles established through the Supreme Court's rulings, serve as binding interpretations of statutory provisions. A contractual clause that once seemed clear may later be interpreted judicially in a way that departs from the parties' original intent.

The solution: contracts should be reviewed, by a qualified lawyer, in light of the most recent judgments and established judicial principles, so that the wording can be revised to clearly reflect the parties' intent and align with the prevailing judicial interpretation.

Second: The Risks That Regular Contract Updates Help Avoid

Failing to review contracts regularly can expose a business to several significant risks, including but not limited to:

1. The risk of unenforceability

Where older contractual provisions directly and clearly conflict with a new statutory text, a court may, in the event of a dispute, rule that those provisions are wholly or partly unenforceable, based on the principle that legislation takes precedence. This can create real difficulties in practice.

2. The risk of losing the right to take a statutory action, or having it delayed

Where the statutory time limit for taking a particular action, such as filing a lawsuit, has expired, a business that failed to observe the updated time limit risks having its claim dismissed, or having its right to the claim delayed until the required procedural step has been completed. An example is the requirement to register a lease electronically before a claim arising from a dispute under that lease can be heard.

3. The risk of penalties and fines

A company may overlook or fail to keep pace with legislative updates that introduce new obligations, exposing it to the penalties or fines the law prescribes for non-compliance. Failing to bring a company's articles of association into line with the law, for example, can result in legal liability, financial penalties, suspension of activity, or even revocation of the company's license altogether.

4. The risk of higher litigation costs and losing disputes

Disputes arising from outdated contracts tend to be more complex and more costly. Where such a dispute reaches the courts, the parties are forced to spend time, money, and effort trying to persuade the court of their contractual intent, working from weak, imprecise, or outdated drafting, rather than relying on clear provisions that comply with current law.

5. The risk of losing competitive advantage

Well-drafted, up-to-date contracts reflect professionalism and seriousness in how a business conducts itself. Outdated or poorly drafted contracts, by contrast, can stand in the way of closing deals with larger companies, for whom strong governance and compliance standards carry real weight.

Conclusion

Updating contracts is not merely a routine formality. It is a strategic, preventive investment in protecting a business's commercial interests amid rapid legal change. Keeping contracts current is the first line of defense against legal risk, and a key part of ensuring a business's long-term sustainability.