The Egyptian Civil Code of 1948 forms the bedrock of Egyptian contract law, laying down the foundational principles for all civil and commercial agreements. It meticulously governs contract formation, validity and enforcement, establishing the core tenets of offer, acceptance and the requirement of a lawful cause and object for a binding agreement. Furthermore, for transactions of a commercial nature, the Commercial Code (Law No 17 of 1999) supplements the Civil Code. This specific legislation provides detailed rules for commercial activities, traders and various commercial agreements, such as sales, transportation and agency.

In international dealings, Egyptian law grants parties the freedom to select the governing law for their commercial contracts. This principle of party autonomy consequently serves as a cornerstone of the legal framework. However, where parties share a common domicile, that domicile’s law will apply unless they explicitly make a different choice or circumstances imply one. Conversely, if parties lack a common domicile or a designated choice of law, the law of the place where they concluded the contract generally governs it.

In Egypt, consensualism significantly benefits commercial contracts. Parties typically form a contract through their mere agreement, regardless of its form. Consequently, this flexibility allows parties to conclude agreements orally, in writing or even electronically, provided they clearly agree on the essential terms.

However, parties must note that certain commercial contracts require a specific form for validity or enforceability. For instance, real estate transactions often necessitate written form and sometimes even official registration. While the general rule certainly favours informality, prudent parties always document their commercial agreements in writing. This proactive step provides clear evidence of the terms and their intentions, effectively mitigating potential disputes and offering a solid basis for enforcement.

In Egypt, the Civil Code (Law No 131 of 1948) and the Commercial Code (Law No 17 of 1999) primarily govern commercial contracts. Specifically, the Civil Code establishes the fundamental legal framework, outlining general principles of contract law, including formation, execution and enforcement. Building on this foundation, the Commercial Code then provides specific regulations for various commercial activities and contracts, such as commercial agencies and partnerships, thereby standardising business agreements. Significantly, if the Commercial Code lacks specific provisions, the Civil Code’s principles apply. Moreover, sector-specific laws, such as the Commercial Agency Law (Law No 120 of 1982) and the Investment Law (Law No 72 of 2017), also govern particular commercial agreements, adding another layer of regulation.

Main Differences Between Egyptian Sales Law and the United Nations Convention on Contracts for the International Sale of Goods (CISG)

Egypt has ratified the CISG, and it became effective in the country on 1 January 1988. This convention primarily governs international contracts for the sale of goods between parties from different contracting states. Consequently, the Commercial Code acknowledges and reflects the CISG’s influence, often prioritising international conventions and established trade usage for international commercial sale-of-goods contracts.

Key differences and nuances include the following.

Scope

The CISG specifically targets contracts for the international sale of goods, striving to unify sales law across various borders. Conversely, Egyptian sales law, encompassing both the Civil Code and Commercial Code, regulates both domestic and international sales, unless international conventions supersede them.

Consideration versus cause

Another fundamental distinction lies in contract validity. While common law systems typically demand “consideration” for a contract’s validity, Egyptian law – stemming from civil law traditions – mandates a “lawful object” and a “legitimate cause” for the obligations to be binding.

Barter transactions

The Civil and Commercial Codes clearly distinguish between barter and sales contracts. They do not typically classify barter as a sale, as Article 88 of the Commercial Code specifically requires monetary consideration for a transaction to qualify as a sales contract. In contrast, the CISG may govern the exchange of goods, depending on how parties interpret the agreement.

Treatment of foreign law

Historically, Egyptian courts regarded foreign law, including the CISG, as a factual matter. Consequently, disputants had to plead its applicability and present evidence of its provisions. However, a new trend is emerging as courts increasingly apply the CISG as a matter of law, recognising its international character and the crucial need for uniform interpretation.

Egypt actively enforces mandatory rules for specific contract types, particularly when it perceives a power imbalance or the need to protect specific parties or public interests. Consequently, specialised legislation often contains these mandatory rules, either supplementing or deviating from the general provisions of the Civil and Commercial Codes.

Specifically, these rules apply to a variety of agreements, including the following.

Commercial Agency Agreements

Specific regulations protect commercial agents’ rights, especially concerning termination and compensation. Therefore, parties cannot entirely waive these crucial protections through contractual agreement.

Consumer Contracts

The Consumer Protection Law (Law No 181 of 2018) outlines mandatory provisions that safeguard consumer rights, covering aspects such as information, safety and redress.

Employment Contracts

The Egyptian Labour Law imposes mandatory terms for working hours, wages, benefits and termination. Consequently, parties cannot undermine these terms via contractual agreements.

Government Contracts

Specific procurement laws, such as Law No 182 of 2018, govern contracts with public authorities. Furthermore, these laws impose strict procedures and conditions, ensuring both transparency and fair competition.

Egypt currently lacks a single, dedicated law regarding franchise agreements. Instead, a combination of the Civil Code, the Commercial Code and provisions related to intellectual property and technology transfer (Articles 72 to 87 of the Trade Law) governs franchising. Consequently, if parties characterise a franchise agreement as a “technology transfer” agreement, Egyptian law – particularly the Commercial Code – may apply mandatorily. Therefore, parties may find it challenging to exclude the jurisdiction of Egyptian courts in such cases.

Ultimately, these mandatory rules reflect a broader policy objective: to ensure fairness and actively protect vulnerable parties within specific contractual relationships.

Over the past three years, legislative reforms in Egypt have largely driven significant legal developments concerning commercial contracts. These reforms primarily aim to enhance the ease of doing business and to adapt to the ongoing digital transformation. While authorities do not always immediately publicise specific landmark court decisions in a consolidated manner, Egyptian courts consistently emphasise enforcing contracts in good faith and ensuring fairness.

Key Legislative Reforms Shaping Contracts

Notably, the Electronic Signature Law (Law No 15 of 2004) and its Executive Regulations (No 361 of 2020) have significantly streamlined electronic transactions, providing greater legal certainty for contracts that parties conclude digitally. This development proves crucial for modern commercial practices, as it affirms the legal validity of electronic signatures and documents when they meet specific technical requirements.

Furthermore, the Consumer Protection Law (Law No 181 of 2018) continues to shape business-to-consumer (B2C) commercial contracts. Authorities are making ongoing efforts to refine its application, particularly in e-commerce, to ensure that it provides robust consumer safeguards.

Additionally, the forthcoming new Labour Law (No 14 of 2025) introduces significant changes to employment contracts and business relationships, thereby indirectly affecting numerous commercial entities. Moreover, the government has updated tax regulations, integrating the 5% schedule tax into the standard 14% VAT regime, which directly impacts contractor cash flow.

Judicial Precedent and Investor Confidence

In a pivotal move, the Supreme Constitutional Court recently upheld the constitutionality of the Appeals Against State Contracts Act (a 2014 law). This significant legislation effectively prevents third parties from challenging contracts that the government signs with investors. Its primary aim is to reassure investors by substantially reducing the risk of deals overturning. Consequently, this ruling holds broad implications for disputes involving state concession contracts.

Emerging Contractual Challenges

Over the past 12 months, disputes related to supply chain disruptions and price volatility have notably increased. This trend has led to a greater emphasis on interpreting contractual clauses that address these issues. Furthermore, it has significantly highlighted the importance of clear and comprehensive drafting in all commercial agreements.

The specific rules governing the choice of applicable law in Egyptian commercial contracts strongly affirm the principle that parties possess the freedom to designate the governing law for their agreements. Egyptian courts generally respect this choice, provided that parties make it clearly and that it genuinely reflects their intent. Consequently, the chosen law will then govern the substance of their contractual obligations, encompassing interpretation, performance and remedies.

Nevertheless, parties must always consider the overriding principles of Egyptian public order and good morals, which inherently limit this choice.

Should parties fail to choose an applicable law in a commercial contract, Egyptian state courts will then apply conflict-of-law rules, primarily those found in the Egyptian Civil Code. Specifically, Article 19(1) of the Civil Code stipulates that the law of the common domicile of the contracting parties governs contractual obligations. Furthermore, if the parties do not share a common domicile, the law of the place where they concluded the contract will generally apply. These provisions apply unless parties explicitly agree – or the circumstances clearly indicate an intention – to apply another law.

Egyptian courts apply certain overriding local laws even when parties choose a foreign law to govern a commercial contract. Crucially, this protection primarily safeguards fundamental principles of Egyptian public order and good morals. Egyptian courts broadly interpret these concepts; they encompass essential legal and ethical standards considered indispensable to the functioning of Egyptian society.

Specifically, overriding local laws may apply in several key scenarios, including the following.

Public Order

This encompasses laws related to national security, economic regulations, fundamental human rights and other core societal values. For instance, Egyptian courts would likely disregard provisions of a foreign law that sanction activities they consider illegal or against public policy in Egypt.

Good Morals

This refers to generally accepted ethical standards and decency within Egyptian society. Consequently, Egyptian courts would not enforce any contractual provision or foreign law that offends these moral standards.

Mandatory Protective Legislation

Egyptian law deems certain laws to be mandatory, and they are designed to protect specific parties, such as consumers or commercial agents. Even if parties choose a foreign law, an Egyptian court might apply these local protective provisions if the contract has a strong connection to Egypt and the protected party is Egyptian.

Therefore, parties must understand that the principle of party autonomy, while strong, does not permit contracting out of these fundamental Egyptian legal and ethical safeguards. To assess the potential impact of these overriding principles on international commercial agreements in Egypt, it is recommended to seek expert legal advice.

Choosing a jurisdiction in commercial contracts – particularly those involving an Egyptian party or between two Egyptian parties – demands careful consideration. When one contract party is Egyptian, parties generally opt for a foreign jurisdiction through mutual agreement. Significantly, Egyptian law fully respects the parties’ freedom to designate a foreign court or tribunal for dispute resolution, reflecting a pragmatic approach to international commerce. Parties frequently make this choice in international contracts to secure neutrality or specialised expertise.

Likewise, even when both contract parties are Egyptian, they may still choose a foreign jurisdiction. However, this practice remains less common for purely domestic transactions. Although Egyptian courts generally permit such agreements, they retain the right to assert jurisdiction in specific circumstances. This typically occurs if the dispute significantly impacts Egyptian public order or if compelling reasons necessitate local court intervention. Nevertheless, in most commercial contexts, Egyptian courts will honour a clear and unambiguous choice of a foreign jurisdiction. This demonstrates Egypt’s unwavering commitment to facilitating international trade and respecting contractual autonomy.

Egypt widely accepts and actively encourages arbitration as a method of dispute resolution for commercial matters. In fact, the Egyptian Arbitration Law (Law No 27 of 1994) provides a modern and comprehensive legal framework, drawing heavily from the UNCITRAL Model Law.

Importantly, both domestic and foreign parties can agree to resolve their disputes through arbitration. Egyptian courts generally respect such arbitration agreements, declining jurisdiction in favour of the arbitral tribunal. Crucially, this practice aligns with international conventions such as the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).

However, mandatory local laws that protect national contract parties – such as distributor protection rights – may still apply. While arbitration certainly offers flexibility, arbitral tribunals seated in Egypt, or those responsible for enforcing awards within Egypt, must generally consider and apply mandatory provisions of Egyptian law that embody public order, even when parties select a foreign law to govern their contract. Consequently, this approach ensures that parties cannot circumvent fundamental protections – particularly for potentially vulnerable parties – merely by choosing arbitration. Therefore, the authors strongly advise consulting a legal expert, as they can thoroughly assess the critical interplay between arbitration clauses and mandatory local laws within specific contractual arrangements.

Egyptian law generally upholds the principle of consensualism for effective contract conclusion, signifying that mutual consent forms the primary requirement for a contract’s validity. Consequently, this principle accommodates various methods of contract conclusion, effectively reflecting the practicalities of modern commerce. The most common and legally recognised forms include the following.

Oral Agreements

Businesses often form many contracts verbally, especially for simpler transactions. However, parties may find proving an oral contract’s specific terms challenging during a dispute.

Written Contracts

Undoubtedly, written contracts stand as the most common and highly advisable choice for commercial transactions. They provide clear evidence of the parties’ intentions and agreed-upon terms. Such contracts can range from simple exchanges of correspondence to formal, comprehensive agreements.

Electronic Contracts

Following the advent of the Electronic Signature Law (Law No 15 of 2004) and its Executive Regulations, parties can now legally conclude contracts electronically, including via email or specialised platforms such as DocuSign. Egyptian law recognises and enforces these digital agreements, provided they meet specific technical and security requirements.

While mutual consent remains paramount, businesses must remember that certain contracts – particularly those involving real estate – demand a specific written form for their validity and enforceability. Conversely, for other commercial agreements, while not always legally mandated, a written record invariably offers significant protection and clarity to all parties involved. For further guidance on effectively securing business agreements, the authors encourage exploring this firm’s comprehensive insights on contractual best practices in Egypt.

Rooted in civil law tradition, Egyptian law does not explicitly codify the concept of culpa in contrahendo (fault in contracting) as a standalone doctrine, though its existing legal mechanisms readily recognise and protect its underlying principles. Crucially, the Egyptian Civil Code emphasises the importance of good faith in performing contracts, and judicial interpretation often extends this vital principle to the pre-contractual negotiation phase.

Consequently, if a party acts in bad faith during negotiations and causes damage to another, the injured party may pursue various remedies. Specifically, they often base their most relevant claims and seek remedies either under the general principles of tortious liability (Article 163 of the Civil Code) for wrongful acts causing harm or through an expansive interpretation of the duty of good faith during contract formation. These remedies typically cover reliance damages, such as expenses that parties incur during negotiations, rather than expectation damages (lost profits from the anticipated contract).

Businesses can effectively include standard terms and conditions in a commercial contract in Egypt by properly incorporating them into the main agreement and drawing the other party’s attention to them. Ultimately, the crucial principle dictates that the party accepting these standard terms must have had a reasonable opportunity to review and understand their content.

Specifically, businesses commonly employ several methods for including these essential terms, as follows.

Direct Incorporation

This method involves printing the standard terms directly within the main contract document itself.

Referencing

Alternatively, businesses can clearly reference the standard terms in the main contract, explicitly stating where the other party can access them (for example, on a website or as an attached annex). Here, it becomes crucial to ensure that the other party acknowledges their receipt or access.

Click-Wrap/Browse-Wrap Agreements

In the realm of electronic contracts, this approach requires a party to click “I agree” after gaining access to the terms. Furthermore, continued use of a service can explicitly constitute acceptance of terms available via a provided link.

Consequently, for standard terms to be truly binding, both parties must clearly indicate their intention for these terms to form an integral part of their agreement. Ambiguity in their incorporation could therefore lead a court to find that the parties did not effectively agree upon the terms, rendering them unenforceable.

Egyptian law primarily applies general principles of contract law – such as offer, acceptance and the meeting of wills – to standard terms, as detailed in the Civil Code. Although no dedicated statute specifically addresses standard terms, the overarching requirements of mutual consent and good faith fundamentally govern their application.

The law actively intervenes to ensure fairness and prevent abuse, particularly when a significant power imbalance exists between contracting parties. Consequently, courts may scrutinise standard terms to ensure that they do not unduly burden or surprise the accepting party. Specifically, the Consumer Protection Law (Law No 181 of 2018) offers consumers robust safeguards against unfair terms in standard-form contracts, mandating clarity and prohibiting deceptive practices. Furthermore, the Civil Code contains provisions that empower a judge to invalidate or modify “contracts of adhesion” when a substantial imbalance in obligations exists between the parties.

Egyptian courts may invalidate or deem standard terms to be ineffective if these terms create an unreasonable disadvantage for one of the parties. This approach stems directly from the general principles of good faith (Article 148 of the Civil Code) and the prohibition against the abuse of rights (Article 5 of the Civil Code). Specifically, courts may strike down or modify clauses that they find excessively onerous or unconscionable, or those that fundamentally alter the contract’s balance to one party’s detriment (especially when that party had little to no opportunity to negotiate the terms). While this invalidation is more common in consumer contracts, it also extends to business-to-business (B2B) contexts where a clear imbalance in bargaining power exists.

A “battle of forms” occurs when parties exchange conflicting standard terms during contract formation, often through documents such as purchase orders, acknowledgments and invoices. Significantly, Egypt’s legal framework lacks a specific codified doctrine that directly addresses the battle of forms. Instead, Egyptian courts typically resolve these disputes by applying the fundamental principles of offer and acceptance, which the Egyptian Civil Code clearly outlines.

According to these principles, if a party responds to an offer by introducing new terms or modifying existing ones, they essentially make a counter-offer. This action, in turn, effectively rejects the original offer. Consequently, parties only form a contract when they clearly and unequivocally accept all essential terms. When a battle of forms arises and parties proceed with performance despite lacking a clear, final agreement on all terms, a court typically examines several factors. It often considers the last set of terms that the parties unequivocally accepted through their conduct, or alternatively the terms common to both parties’ forms. While the “last shot” rule – which suggests that the recipient accepts the last set of terms sent if they do not object – frequently influences decisions, it does not deterministically resolve the issue. Courts also consider any implied terms established by law or custom. Ultimately, this approach underscores that a contract requires a clear “meeting of the wills” for full establishment.

Original Signature Requirements

Egyptian law does not strictly require an original physical signature for many commercial contracts to be valid, provided that parties can prove consent. However, for certain specific commercial contracts, the law mandates an original signature. For instance, official registration documents or certain corporate resolutions often demand wet-ink signatures. Furthermore, agreements involving real estate transactions, for example, frequently require specific formalities that go beyond a simple signature.

Notarial Deeds

Egyptian law mandates notarial deeds for particular types of contracts, primarily those involving the transfer of title to real estate, mortgages or the establishment of certain companies. Consequently, a notary public must formally authenticate these deeds to make them legally effective and registrable.

Electronic Signatures

In Egypt, parties can effectively conclude a contract using an electronic signature, such as DocuSign. Indeed, the Electronic Signature Law (Law No 15 of 2004) and its Executive Regulations (No 361 of 2020) explicitly recognise the legal validity and enforceability of electronic signatures. However, these signatures must meet specific technical requirements, and must be issued by licensed certification authorities (such as ITIDA-certified providers). Ultimately, this robust legal framework supports the digitisation of commercial transactions, offering both efficiency and enhanced security.

Egyptian law mandates official registration for certain commercial contracts. This ensures their validity and enforceability against third parties, or fulfils specific regulatory requirements. However, while most standard commercial sale or service agreements do not require registration, several key contract types consistently demand it. These include the following.

Real Estate Contracts

Parties must register contracts involving the sale, purchase or mortgage of real estate with the Real Estate Publicity Department. This action transfers ownership or creates enforceable rights against third parties.

Company Formation Documents

Similar to the foregoing, companies must register their articles of association and any subsequent amendments with the Commercial Register and other relevant authorities (eg, the General Authority for Investment and Free Zones (GAFI) for investment companies). This establishes the legal entity and defines its corporate structure.

Pledges Over Commercial Establishments

To ensure effectiveness against third parties, parties must register agreements that create a pledge over a commercial establishment (fonds de commerce).

Leases of Commercial Premises for Long Durations of Time

Long-term leases of commercial properties may necessitate registration. This step ensures their enforceability and provides protection for the lessee.

Intellectual Property Assignments/Licences

To guarantee enforceability against third parties, owners should record assignments or exclusive licences of intellectual property rights (eg, trade marks, patents) with the relevant intellectual property office.

Crucially, failing to register a contract where required can render it unenforceable or ineffective against third parties, potentially leading to significant legal complications. Therefore, for complex transactions, the authors always advise consulting with legal counsel. This ensures compliance with all necessary registration formalities.

Beyond mutual consent, parties must also fulfil several other fundamental requirements to conclude an effective commercial contract under Egyptian law. These essential elements collectively ensure the contract’s legal soundness and enforceability.

Legal Capacity of Parties

Both parties must possess the legal capacity to enter into a contract. Typically, this means that they must be of legal age (21 years in Egypt) and possess a sound mind. Furthermore, legal entities must be duly incorporated, and authorised individuals must represent them.

Lawful Object

The contract’s subject matter must be lawful, possible and clearly defined. Consequently, contracts involving illegal activities or impossible-to-perform objects become null and void.

Lawful Cause (Consideration)

Crucially, the contract must possess a lawful cause or consideration, signifying a legitimate reason or purpose for entering the agreement. While Egyptian law does not always require a direct exchange of value in the common law sense, parties must nevertheless demonstrate a serious and legitimate underlying motive.

Absence of Defects of Will

Parties must freely give their consent, ensuring that defects of will – such as error (mistake), fraud, duress (coercion) or exploitation – do not vitiate it. If parties do not genuinely give consent, the contract may become voidable.

Indeed, these elements are absolutely crucial for the validity of any contract in Egypt. Consequently, even with mutual consent, a court may challenge an agreement lacking these elements and potentially declare it void or voidable. Therefore, understanding these foundational requirements is paramount; it ensures that commercial agreements can withstand legal scrutiny.

Egyptian law primarily distinguishes between B2B and B2C contracts based on an additional layer of consumer protection legislation that applies specifically to B2C transactions. While the general principles of the Civil Code and the Commercial Code (for commercial aspects) fundamentally govern both contract types, B2C contracts also face specific mandatory rules.

Specifically, B2B contracts primarily operate under the Civil Code and the Commercial Code. These codes emphasise contractual freedom, enabling sophisticated commercial parties to negotiate their terms with considerable autonomy. The legal system, therefore, prioritises ensuring fair competition and enforcing agreements precisely as written, always subject to general principles of good faith and public order.

Conversely, B2C contracts face significant regulation from the Consumer Protection Law (Law No 181 of 2018), which supplements the Civil and Commercial Codes. This crucial legislation introduces specific rights for consumers and imposes clear obligations on suppliers, directly addressing the inherent power imbalance between businesses and individual consumers. Consequently, it mandates stricter requirements for transparency, product safety, warranties and redress mechanisms. These provisions often override general contractual freedom to prioritise consumer safeguards.

Ultimately, while B2B contracts offer businesses greater flexibility in drafting terms, B2C contracts mandate careful adherence to consumer protection regulations. This adherence is crucial not only to avoid potential penalties but also to ensure the enforceability of agreements.

Egyptian law rigorously protects consumers in B2C contracts. It establishes a robust framework of rights, primarily enshrined within the Consumer Protection Law (Law No 181 of 2018). This legislation therefore actively empowers consumers and ensures fair dealings within the marketplace. Key consumer protection rights include the following.

Right to Information

Consumers possess the right to receive clear, accurate and comprehensive information about products and services, encompassing price, specifications, origin and any potential risks. This ensures that they can make truly informed purchasing decisions.

Right to Safety

Products and services must remain safe for their intended use and conform to established health and safety standards. Furthermore, suppliers must notify the Consumer Protection Agency of any defects and promptly take corrective action if a product poses a threat to safety.

Right to Redress

Should consumers encounter defective products or services, they have the right to a remedy, which includes repair, replacement or a full refund. Moreover, the law establishes the Consumer Protection Agency to efficiently handle complaints and resolve disputes.

Right of Withdrawal (Cooling-Off Period)

Specifically for online or remote purchases, consumers generally have a crucial right to withdraw from the contract within a specified period (typically 14 days), and they do not even need to provide a reason.

Right to Fair Contract Terms

The law explicitly prohibits businesses from imposing unfair, deceptive or exploitative terms in B2C contracts. In fact, the Consumer Protection Agency actively enforces these rights and can intervene to invalidate such clauses, thus protecting consumers from unjust agreements.

Ultimately, businesses that adhere to these fundamental rights not only fulfil their legal obligations but also build significant trust and enhance their reputation within the dynamic Egyptian consumer market. The authors encourage considering this firm’s comprehensive expertise in Egyptian consumer law for detailed guidance on expertly navigating these crucial consumer protection regulations.

Egyptian law – particularly concerning commercial contracts – primarily bases its core concept of liability on fault and the principle of compensatory damages. Consequently, the Egyptian Civil Code generally holds a party liable for damages if they commit a fault (whether contractual or tortious) that directly harms another party.

Contractual Liability

Contractual liability typically arises from the breach of a valid contract. To establish this liability, a plaintiff must generally demonstrate:

• a breach of a contractual obligation;
• that the aggrieved party suffered damage; and
• a clear causal link between the breach and that damage.

Furthermore, the breaching party is typically liable for foreseeable damages.

Tortious Liability (Delictual Liability)

Conversely, tortious liability (also known as delictual liability) emerges from an unlawful act that causes harm to another, completely independent of any contractual relationship. This distinct form of liability specifically requires proving:

• a wrongful act or omission;
• fault (either negligence or intent);
• actual damage; and
• a direct causal link between the wrongful act and the damage.

Ultimately, for both types of liability, the defaulting party must typically compensate the injured party for the actual damages they suffered. This compensation aims to place the injured party in the position they would have occupied if the contract had been performed correctly. Significantly, this includes both material losses and, in certain cases, moral prejudice. Therefore, Egyptian law emphasises restoring the injured party rather than punishing the breaching party.

Egyptian law generally does not provide for punitive damages in the common law sense. Instead, the legal philosophy underpinning compensation in Egypt is corrective, aiming to indemnify the injured party for actual losses rather than imposing penalties to punish wrongdoers or deter future misconduct.

Nevertheless, when considering liability caps in terms of damage categories, Egyptian law does not typically impose statutory maximums for specific types of damages, such as loss of profit in commercial contracts. However, several critical principles do apply, as follows.

Compensatory Nature

Egyptian courts award damages, including for profit loss, only when a direct link to the breach exists and the damages represent actual, foreseeable losses. They do not award speculative or indirect damages.

Judicial Review of Agreed Damages

While parties can indeed agree on liquidated damages clauses, Egyptian courts firmly retain the power to review these clauses. The courts may reduce the amount if they deem it excessively high and disproportionate to the actual loss a party suffers. Crucially, Egyptian law considers any agreement precluding such judicial review void.

No Exceeding Agreed Compensation

A judge generally cannot award compensation of higher than the amount the parties agreed on in the contract. This rule holds unless the claimant successfully proves fraud or a grave error by the opponent.

Consequently, while direct liability caps are absent, the foregoing compensatory principles and judicial oversight collectively ensure that damages remain proportionate to the actual harm sustained.

In Egypt, the law specifically establishes strict liability – or liability without fault – in certain defined categories. While this concept represents an exception to the general rule of fault-based liability, courts typically impose it where an inherent risk is associated with an activity or a particular relationship.

The key areas where Egyptian law applies strict liability include the following.

Liability for Things

The law holds the custodian of a thing strictly liable for any damage it causes, even if no fault on their part is proven. This principle notably extends to dangerous machinery, buildings and animals.

Employer’s Liability for Acts of Employees

Employers bear strict liability for damages that their employees cause while acting within the scope of their employment, even if the employer themselves committed no personal fault.

Product Liability

While Egypt may not possess a comprehensive product liability law mirroring some western jurisdictions, courts can nevertheless apply principles of strict liability to manufacturers or sellers of defective products that cause harm. This often occurs, for instance, under consumer protection provisions or general principles of safety obligations.

Liability for Buildings in Ruin

The owner of a building that collapses or causes damage because of its ruin is strictly liable for the resulting harm.

Consequently, while these instances demonstrate deviations from the general fault-based rule, they remain specific exceptions and not a pervasive principle across all commercial contracts. Indeed, most contractual breaches still demand proof of fault to establish liability.

Egyptian law generally permits contractual limitations of liability, which fundamentally reflect the principle of freedom of contract. Parties to a commercial agreement, therefore, often include clauses that limit the types of damages they can recover, cap the amount of liability, or even exclude liability for specific events. However, this freedom is not absolute; instead, significant limitations restrict it, as follows.

Gross Negligence or Fraud

Courts typically consider clauses that attempt to limit or exclude liability for gross negligence (faute lourde) or fraud (dol) null and void as these provisions violate public order.

Public Order and Good Morals

Any limitation of liability that contravenes fundamental principles of public order or good morals becomes unenforceable.

Judicial Review

Crucially, as mentioned previously, even parties’ agreed-upon liquidated damages or liability caps face judicial review if courts deem them excessively disproportionate to the actual damage that a party suffers.

The distinction between a standard term and an individually negotiated clause also significantly impacts enforceability. While the general limitations apply to both, courts in particular scrutinise standard terms more rigorously (especially in contracts of adhesion) to ensure that these terms do not create an unreasonable disadvantage for one party. Individually negotiated clauses, by contrast, generally receive greater deference, provided that the parties possess equal bargaining power. Ultimately, businesses should always ensure that they clearly draft any limitation-of-liability clauses, make them reasonable, and confirm that they do not fall foul of mandatory legal prohibitions.

Egyptian law recognises the concept of force majeure, providing relief from contractual performance even without specific provisions in the commercial contract. Significantly, the Egyptian Civil Code establishes this fundamental principle.

Prerequisites for Relief

The prerequisites for receiving relief are as follows.

Unforeseeability

Parties must not have foreseen the event when they concluded the contract.

Irresistibility

The event must prove irresistible; consequently, the affected party could not prevent or overcome it despite reasonable efforts.

Impossibility of performance

Crucially, the event must render performance of the contractual obligation absolutely impossible, not just more difficult or costly. This impossibility must objectively affect anyone in the obligor’s position, and not solely the particular party.

External cause

The event must originate externally, beyond the party’s control, and they must not have caused it.

Requirements on the Affected Party to Avoid or Mitigate the Impact

An affected party generally must take reasonable steps to avoid or mitigate the force majeure event’s impact. These steps include the following.

Notification

This involves promptly notifying the other party about the force majeure event and its probable impact on performance.

Mitigation efforts

This involves taking all reasonable and commercially viable measures to minimise the event’s resulting delay or damage.

Demonstrating impossibility

This means being able to demonstrate that performance became objectively impossible, even after exhausting all reasonable efforts.

Summary

If parties fulfil the foregoing prerequisites, the contract may face suspension or termination, and the affected party can then gain relief from liability for non-performance.

Egyptian commercial contracts commonly include a force majeure clause, which provides relief from performance in circumstances beyond a party’s control. Despite this statutory recognition, parties frequently incorporate specific clauses to clearly define what constitutes a force majeure event. These clauses also outline notification procedures and specify the consequences of such an event, such as contract suspension, termination or renegotiation.

Key Benefits of Incorporating a Force Majeure Clause

Clarity and certainty

Greater certainty and clarity can be obtained regarding parties’ rights and obligations during unforeseen circumstances, which minimises potential disputes.

Scope expansion

Contractual clauses empower parties to expand the force majeure definition beyond the Civil Code’s strict legal interpretation of “absolute impossibility”. This allows them to potentially include events that render performance merely impractical or uneconomical.

Procedural requirements

Clauses can also stipulate specific notice periods, documentation requirements, and mitigation duties, extending beyond general statutory expectations.

The absence of such a clause would not prevent parties from claiming relief under Egyptian statutory law, if applicable. Specifically, the Egyptian Civil Code’s provisions on force majeure (Article 165) and unforeseen circumstances (Article 147) would still govern. However, a well-drafted contractual force majeure clause offers significantly greater clarity and certainty. It empowers parties to tailor the legal consequences precisely to their specific business needs, rather than solely relying on the general and sometimes less predictable interpretations of statutory law. Therefore, while parties do not strictly require a specific clause to claim relief, its inclusion is highly recommended for comprehensive contractual risk management.

Egyptian law provides for legal principles allowing a party experiencing substantial hardship to seek amendment or renegotiation of a commercial contract, even without specific contractual provisions. Specifically, Article 147(2) of the Egyptian Civil Code primarily governs this concept. It addresses the theory of “unforeseen circumstances”, which legal professionals often equate with hardship or théorie de l’imprévision.

Consequently, under this crucial principle, a judge may intervene if exceptional and unpredictable events of a general character occur after the parties conclude a contract. These events must render the performance of the contractual obligation excessively onerous (though not impossible), thereby threatening the debtor with exorbitant loss. In such cases, the judge – carefully considering the circumstances and the interests of both parties – has the discretion to reduce the excessive obligation to reasonable limits.

Ultimately, this intervention aims to restore the contractual equilibrium that the unforeseen event disrupted. It is crucial to note that, unlike force majeure, hardship does not render performance impossible; instead, it makes it extremely difficult or economically ruinous. Furthermore, Egyptian law explicitly deems any agreement attempting to waive this right void.

Businesses in Egypt increasingly incorporate “hardship clauses” into commercial contracts. These provisions specifically allow for amendments or renegotiation rights when one party experiences substantial hardship.

Specifically, these hardship clauses typically aim to define what constitutes hardship, trigger specific negotiation processes, and outline potential remedies. Such remedies might include price adjustments, contract modifications, or even termination if renegotiation ultimately fails.

Nevertheless, the absence of a contractual hardship clause does not prevent parties from asserting the rights that Egyptian statutory law foresees in these challenging circumstances.

Indeed, Article 147(2) of the Egyptian Civil Code explicitly establishes the principle of unforeseen circumstances as a mandatory rule. Consequently, even if a contract lacks a specific hardship clause, a party facing excessively onerous performance due to exceptional and unpredictable events can still petition a court. The court then adjusts the contractual obligations to reasonable limits.

Significantly, parties cannot contractually waive this fundamental statutory protection. This truly emphasises the judiciary’s crucial role in maintaining contractual fairness during extraordinary situations.

Egyptian law, primarily governed by the Civil Code, establishes a comprehensive framework of warranties and remedies for non-fulfilment, late fulfilment and breaches of contractual terms in commercial contracts. These crucial provisions aim to protect the injured party and actively ensure the enforceability of agreements.

Main Warranties (Often Implied in Sales Contracts)

Warranty of title

The seller implicitly warrants that they have the right to sell the goods and that the goods are free from any third-party claims or encumbrances.

Warranty against hidden defects (latent defects)

The seller warrants that the goods are free from hidden defects, which would render them unfit for their intended purpose or significantly diminish their value. Consequently, the buyer must typically notify the seller of such defects within a reasonable time after discovery.

Warranty of conformity

The goods must conform to the description, quantity, quality and specifications agreed on in the contract.

Main Remedies for Non-Fulfilment, Late Fulfilment and Breach of Terms

Specific performance

Egyptian law primarily prioritises specific performance as a remedy. This means that the aggrieved party can seek a court order compelling the breaching party to perform their contractual obligation precisely as agreed. Courts generally prefer this remedy unless performance becomes impossible or would prove excessively burdensome for the debtor, offering only minor benefit to the creditor.

Monetary compensation (damages)

If specific performance proves impossible or inappropriate, the aggrieved party can instead claim monetary compensation for the actual damages that they suffered due to the breach. This compensation encompasses direct losses and loss of profit, provided the parties could foresee these at the time of contracting.

Agreed compensation (liquidated damages)

Furthermore, parties can agree on a penalty clause or liquidated damages clause within the contract, predetermining the compensation they will pay in the case of breach. However, courts retain the power to adjust (reduce or increase) the agreed amount if they deem it excessively high or unduly low compared to the actual damage incurred.

Further Remedies and Mechanisms

Termination (rescission) of contract

In cases of fundamental breach, the aggrieved party may gain the right to seek termination of the contract, thereby releasing both parties from their future obligations. Typically, termination requires a court order, unless the contract specifically includes an explicit termination clause that allows for unilateral termination upon certain breaches, or unless a formal notice period has elapsed without the breaching party providing a cure.

Reduction of price

Alternatively, in cases of partial non-performance or minor defects, the aggrieved party may seek a reduction in the contract price that aligns with the extent of the non-conformity.

Right of retention

In bilateral contracts, a party may exercise their right to withhold their performance until the other party fulfils their reciprocal obligation.

Delay interest

For late fulfillment of monetary obligations, statutory delay interest applies. This rate typically stands at 5% annually for commercial matters, unless the parties agree on a different rate, up to 7%.

In Egypt, parties to a commercial contract generally enjoy significant freedom to deviate from the main warranty and remedy provisions that statutory law provides. Indeed, this flexibility directly reflects the principle of contractual autonomy, which empowers businesses to precisely tailor their agreements to specific commercial risks and operational realities.

This considerable freedom grants parties several key capabilities, such as the following.

• Modifying warranties: parties can, for instance, expand, limit or even entirely exclude certain implied warranties. Alternatively, they might establish specific express warranties that extend beyond what the law typically implies.
• Stipulating remedies: parties often incorporate clauses into contracts that specifically define the remedies for breach. These might include provisions for liquidated damages, penalty clauses or detailed procedures for dispute resolution.
• Limiting liability: as previously noted, parties frequently agree to limit their liability for particular types of damages or to cap the total amount of compensation. However, these crucial limitations must not extend to gross negligence or fraud, and a court must not deem them unconscionable.

Despite this expansive contractual freedom, it is crucial to understand that this ability to deviate is not absolute. Indeed, Egyptian courts will deem any contractual provision void if it contravenes public order or good morals or attempts to circumvent mandatory protective laws, such as specific consumer protection rights. Consequently, courts actively retain the power to review and potentially adjust excessively punitive or unfair clauses, especially those concerning liquidated damages. Therefore, while Egyptian law certainly offers flexibility in contract drafting, parties must meticulously exercise this flexibility strictly within the established bounds of Egyptian legal principles.