Commercial Contracts 2025 Comparisons

The Iraqi Civil Code gives parties the freedom to choose the applicable law for their commercial contract, provided that such choice of law is not inconsistent with the public order and morals of Iraq. If the applicable law chosen by the parties in their commercial contract is the law of a state that has several legal systems, the law of such state (which was chosen by the parties) will determine which of these systems must be applied.

The Iraqi Civil Code does not impose a formality requirement on the conclusion of contracts, but other laws contain formality requirements for specific types of contracts and transactions, such as:

• contracts involving the disposal of real estate interests, as they have to be registered at the real estate registration department;
• contracts for the sale of vehicles, as they have to be registered at the traffic directorate; and
• commercial papers, as the commercial agency law stipulates that mandatory information must be contained in a commercial paper (promissory notes, cheques and bills of exchange) in order for such instruments to have the protections of the Code of Commerce.

The main legislation applicable to commercial contracts is the Iraqi Civil Code No 40 of 1951 and the Iraqi Code of Commerce No 30 of 1984. The Iraqi Civil Code constitutes a comprehensive legal framework with 1,382 articles covering a wide range of civil and commercial matters, while the United Nations Convention on Contracts for the International Sale of Goods (CISG) is focused primarily on international contracts for the sale of goods. The Iraqi Code of Commerce does not regulate sales contracts specifically.

The Iraqi Civil Code is rooted in civil law traditions and includes detailed provisions on obligations, torts and contract enforcement, while the CISG prioritises uniformity and simplicity, to facilitate international trade.

Iraq acceded to the CISG on 5 March 1990, and the convention entered into force for Iraq on 1 April 1991. However, the Iraqi law relevant to accession to treaties at the time did not require an act of parliament. The Iraqi treaty law No 35 of 2015 introduced a new requirement that all treaties must be ratified by an act of parliament and did not specify its retroactive application. As a result, it can be difficult to argue the CISG before Iraqi courts as there is no parliamentary ratification instrument.

It should be noted that the contracting process for governmental contracts is different under the Iraqi legal system. The general contract rules still apply, but government contracts are subject to additional rules – mainly the Instructions on the Implementation of the Governmental Contracts No 2 of 2014, which impose certain mandatory obligations on the contractor (one of the most prominent examples is the obligation to provide a “Letter of Good Performance” to the governmental entity with which the contractor contracts).

Public Sector Contracts

The contract awarding process for governmental contracts in Iraq is governed by Instructions No 2 of 2014 (see 1.3 Application to Local Legislation to Commercial Contracts), which aim to provide the procedural and legal framework for public sector contracting in Iraq. The Instructions mandate that governmental contracts should be awarded through a transparent and competitive bidding process, which must promote fairness and accountability in order to deter any attempts of corruption and manipulation from the governmental and contractor side.

The general conditions are non-negotiable as they are uniformly drafted by the Ministry of Planning for all procurement contracts. One of the main characteristics of these contracts is that they require multiple warranties/guarantees from the contractor to ensure their commitment to the completion of the contract and the fulfilment of their obligations.

Real Estate Contracts

Real estate contracts are subject to the Real Estate Registration Law No 43 of 1971, which requires that all contracts concerning the property must be registered with the relevant Real Estate Registration Directorate.

Oil and Gas Contracts

The oil and gas sector in Iraqi operates under specific legal frameworks overseen by the Ministry of Oil. Contracts in this sector often follow production sharing or technical service models, and must include clauses on environmental standards, safety protocols, royalty structures and local employment quotas.

Franchise, Sales Agent and Distributor Contracts

Such contracts are governed in Iraq by the Commercial Agency Law No 79 of 2017, which regulates relationships between foreign companies and Iraqi intermediaries. These agreements allow foreign principals to appoint local agents or distributors to market, sell or distribute goods and services within Iraq.

To be legally enforceable, such contracts must be registered with the Ministry of Trade; unregistered agreements are not recognised by Iraqi courts and may result in the loss of legal protection. The Iraqi party must be a registered commercial entity, and the contract must be written in Arabic or accompanied by a certified Arabic translation.

Key provisions typically include territorial scope, exclusivity rights, commission structures, duration, renewal terms and termination conditions. Dispute resolution clauses are essential, with arbitration commonly preferred for cross-border arrangements. Iraq prohibits foreign companies from directly engaging in agency activities without a registered local intermediary.

Iraq’s ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards through Law No 14 of 2021 was an important legal development. However, even after Iraq’s accession to the New York Convention, courts were still hesitant to apply its principles in practice, as there were multiple instances of arbitral awards being unrecognised and unenforced by Iraqi law, which resulted in confusion and uncertainty as to whether Iraqi courts would recognise international arbitral awards. This pushed the Iraqi Supreme Judicial Council (SJC) to instruct judges that they should bear the New York Convention in mind when presented with a dispute involving arbitration or an arbitral award. The SJC has also held workshops and training for civil judges in Iraq, to further ingrain the principles of the New York Convention in the Iraqi legal system, resulting in an increase in the recognition and enforcement of international arbitral awards by the Iraqi civil and commercial courts.

In Iraq, the parties to a commercial contract may choose the applicable law, provided that it does not conflict with the public order and morals of Iraq.

If no law is chosen by the parties, Iraqi courts will apply the law of the parties’ common domicile; if the parties’ domiciles differ, the law applied by the courts in Iraq will be the law of the place where the contract was concluded, unless circumstances suggest the parties intended another law to be applied. Moreover, contracts concerning immovable property are governed by the law of the property’s location. Lastly, procedural matters are always governed by Iraqi law if proceedings are initiated in Iraq before an Iraqi court.

While Iraqi courts generally respect the parties’ choice of applicable law, this choice is not absolute, as Iraqi courts enjoy the discretionary power to rule on the inapplicability of the parties’ chosen law if said law is in conflict with the public policy and morality of Iraq. Public policy is interpreted broadly and generally includes all mandatory Iraqi law.

Regardless of the parties’ nationality, a choice of foreign jurisdiction cannot affect the jurisdiction of Iraqi courts.

If one or both of the parties to the contract are from Iraq, they have the ability to agree that any dispute arising between them could be referred to arbitration, as Iraqi law recognises arbitration as a viable alternative dispute resolution method. The parties are free to choose either domestic or international arbitration to resolve their disputes, provided that the arbitration clause/agreement is clearly drafted and was mutually agreed upon by the parties.

If the parties agree to arbitration, Iraqi courts will generally respect that choice and will suspend proceedings in favour of arbitration (in line with Articles II 3 and V 2 of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards). However, if one party files a claim and the other does not object and raise a plea for arbitration at the first hearing before the Iraqi courts, then this shall constitute a waiver of the right to arbitrate, in which case the court may proceed with the litigation and deem the arbitration clause waived. Iraqi courts apply this procedural requirement strictly, and failure to assert the arbitration agreement at the first hearing before the court will result in the loss of its protective effect.

An effective contract can be concluded in multiple forms under Iraqi Civil Law, including:

• oral agreements – contracts may be formed verbally if no specific form is required by law;
• written contracts – writing is mandatory for certain contracts, such as those involving real estate, commercial agency or government entities; and
• implied agreements – a contract may also be formed through conduct that clearly indicates mutual consent, such as delivery and payment.

The general rule is that form follows function; unless a law requires a specific format, the parties’ mutual consent is sufficient to create a binding contract.

However, Iraqi evidence law requires transactions of more IQD5,000 (less than USD5) to be proven by writing, and this effectively creates a writing requirement if there is no method to prove the transaction other than oral testimony.

The concept of culpa in contrahendo is not formally recognised under Iraqi law. Claims based on reliance before a contract is concluded would have to rely on general tort law rules.

The rules for government contracts do create an obligation on the winning bidder to sign the contract on the terms offered by the government, and provide for penalties for failure to do so. However, this principle is not rooted in bad faith dealing as the concept of culpa in contrahendo generally implies.

The standard terms of conditions of one party can be included in the commercial contract under Iraqi law if the other party agrees on their inclusion. In practice, most contracts concluded in Iraq contain the standard terms of conditions of one party as they are sent in the offer stage so that the other party may review, amend and agree or reject them.

Furthermore, governmental contracts in Iraq must be concluded using the standard terms of conditions of the Ministry of Planning, unless an exception is granted.

The standard terms will apply if they satisfy the requirements of the Iraqi Civil Code, meaning the other party must consent to the application of these terms and that they must be included in good faith and not contain any unfair terms.

Standard contract terms may be invalidated if they impose an unreasonable disadvantage on one of the parties. The Iraqi Civil Code emphasises free consent, good faith and fair dealing, and courts may strike down clauses that are hidden, excessively burdensome or contrary to public order and morality.

The result of a “battle of forms” (where parties exchange conflicting standard terms during contract negotiation) is determined by general principles in the Iraqi Civil Code, particularly those concerning consent, offer and acceptance, and good faith. If the parties proceed with performance despite differing terms, Iraqi courts may interpret this as acceptance of the last set of terms exchanged (the “last shot” rule), unless evidence shows there was a mutual intent to exclude conflicting clauses.

The Iraqi Civil Code requires original signatures or even notarisation for certain types of commercial contracts, such as those relating to real estate and commercial agency, as they are required to be registered with the relevant Iraqi authorities due to the fact that these contracts often involve regulatory oversight, which necessitate a higher level of formality. This means that the parties must sign, notarise, translate and submit these contracts to the relevant governmental authority for registration, which is necessary for enforcement, as the non-registration of these contracts means that they would not be considered valid and enforceable by the Iraqi authorities.

Iraqi law recognises electronic signatures under the Electronic Signature and Electronic Transactions Law No 78 of 2012, which provides a legal framework for the use of electronic signatures and commercial and civil transactions and contracts. Contracts signed electronically can be valid in theory, but they must be certified by a licensed electronic signature authenticator; as of October 2025, there are no licensed private certification authenticators in Iraq.

The following commercial contracts require registration in Iraq.

• Commercial agency and franchise agreements have to be registered at the Ministry of Trade in accordance with Law No 79 of 2017.
• Real estate transactions – sale, lease or mortgage contracts involving immovable property must be registered at the Real Estate Registration Directorate in the relevant area where the real estate is located, in accordance with Real Estate Registration Law No 43 of 1971.
• Company formation and amendments – contracts related to establishing or restructuring companies must be registered with the Registrar of Companies, pursuant to Companies Law No 21 of 1997.

Failure to register these contracts may result in their non-recognition by courts or administrative authorities.

The most notable requirements, apart from mutual consent, are formality requirements for specific types of contracts, such as real estate and commercial agency contracts (see 3.8 Official Registration).

B2C contracts must comply with Iraq’s Consumer Protection Law No 1 of 2010, which mandates clear terms, fair pricing and the right to return defective goods. In contrast, B2B contracts are primarily regulated by the Iraqi Civil Code and Commercial Law, allowing more contractual freedom and fewer statutory protections.

B2C contracts are governed by the Iraqi Civil Code and the Iraqi Consumer Protection Law No 1 of 2010, which guarantees key rights to the Iraqi consumer, such as safety, transparency and redress. Businesses and individuals engaging with Iraqi consumers are obliged to provide accurate product information to said consumer. They must also ensure fair pricing and offer remedies for defective goods or misleading practices.

The main consumer protection rights outlined in Law No 1 of 2010 are as follows.

• Right to safety – consumers are to be protected from products or services that may harm their health or pose a safety risk.
• Right to information – suppliers are obliged to clearly disclose product details and information, including origin, ingredients, usage instructions and potential risks.
• Right to choose – consumers should have access to a variety of goods and services without coercion or monopolistic practices.
• Right to redress – consumers are entitled to compensation, replacement or a refund if a product is found to be defective or misleading.
• Right to representation – consumers have the ability to file complaints through the Consumer Protection Council (which has not yet been established as of October 2025) or relevant agencies that are empowered to investigate and enforce penalties.

According to the Iraqi Civil Code, the core concept of liability defers if said liability resulted from a contractual breach or a tortious act. Contractual liability arises when one party fails to fulfil obligations agreed upon in a contract, leading to harm or loss for the other contractual party.

Under the Iraqi Civil Code, tortious liability is built on three foundational elements:

• fault – the responsible party must have committed a wrongful act, either intentionally or negligently;
• damage – there must be actual harm suffered by the injured party, whether physical, financial or emotional; and
• causation – a direct link must exist between the fault and the damage, and the harm must result from the wrongful act.

All three pillars must be present in order for tortious liability to be established in civil claims.

Punitive damages are not recognised as a concept in Iraqi law per se, as compensation is limited to the actual harm suffered by the aggrieved party. Loss of profit can be included as damages if said loss of profit was foreseeable and was caused directly by the breach/harmful action.

The concept of liquidated damages is recognised by the Iraqi Civil Code, but courts may use their discretion to reduce the liquidated damages if they deem them excessive.

Overall, civil liability under the Iraqi Civil Code is assessed conservatively, focusing on restoring the injured party rather than punishing the wrongdoer.

Iraqi law recognises liability without fault in certain cases – for instance, employers can be held responsible for harm caused by their employees if said harm occurred as a result of their employees carrying out their official work duties, even if the employer was not negligent. In addition, owners of buildings, animals or machinery can be held liable for damage caused by the thing they own.

The Iraqi Civil Code gives the parties the ability to limit their contractual liability, although it does not limit liability in cases of tortious acts. Furthermore, even contractual liability limitation can be deemed void if the act resulting in the liability was fraudulent or constitutes a gross error.

Individually negotiated clauses between the parties are more likely to be upheld by the court due to their mutual nature, as both parties participated in their drafting through negotiations. Standard terms would be scrutinised by the courts if their limitation is seen as excessive, or if they were not disclosed properly to the other party in the contract.

Iraqi law provides relief from contractual performance in cases of force majeure or emergency circumstances, even if the contract lacks a specific clause. This is governed by the Iraqi Civil Code, which allows courts to intervene when unforeseen events make performance impossible or excessively burdensome.

The prerequisite to receiving relief is that the affected party must provide proof that the event in question that caused its inability to perform its obligations was unforeseeable, external and unavoidable. The party will also need to prove that the event directly prevented or severely hindered its ability to perform its contractual obligations.

The Iraqi Civil Code also distinguishes between complete impossibility of performing the contractual obligations (which may lead to termination) and hardship, which severely hinders the performance of the obligations and makes it burdensome but not impossible (which may allow for contract adjustment).

The party seeking relief is also expected to take reasonable steps to mitigate the impact of the event, such as exploring alternative means of performance and duly and quickly notifying the other party. Iraqi courts may reduce or suspend obligations, or even terminate the contract, depending on the severity of the disruption caused by the force majeure event.

It is standard practice in Iraq for commercial contracts to include a force majeure clause to clarify relief from performance.

However, even if the parties to a commercial contract did not include such clause in their agreement, Iraqi law allows statutory relief if the event is unforeseeable, external and unavoidable. The absence of a clause does not prevent the claiming of relief, but it would be more useful to the parties to include such a clause as it will help to define the scope and procedure more clearly if such a majeure event occurs.

Iraqi law allows for contract adjustment in cases of substantial hardship if the parties mutually agree on renegotiations, even if the contract lacks a specific renegotiation clause. Under the provisions of the Iraqi Civil Code, if an exceptional and unforeseeable event or circumstance occurs after a contract is formed, causing one party’s obligations to become excessively onerous/burdensome, the affected party may request the court to adjust the terms or even terminate the contract.

It should be noted that the hardship must not make the performance of the contractual obligation impossible (which would trigger force majeure), but it must significantly disrupt the contractual balance between the parties, at which point the law gives the Iraqi civil court the discretion to reduce the burden to a reasonable level, ensuring fairness while preserving the contract’s core purpose, or the parties can mutually renegotiate their contract to address such hardship.

Force majeure clauses are more common than hardship clauses in practice. However, even if the parties to a commercial contract did not include such clause in their agreement, Iraqi law allows statutory relief. The absence of a clause does not prevent the claiming of relief but it would be more useful to the parties to include such a clause as it will help to define the scope and procedure more clearly.

Under Iraqi law, if a party fails to fulfil or delays fulfilling a contract, the injured party may seek compensation for actual damages and lost profits. Courts can also order specific performance or allow the contract to be terminated if the breach is serious. A statutory interest of 5% applies to late payments in commercial contracts. Contracts are expected to be performed in good faith, with lawful and clearly defined terms.

In Iraq, businesses have room to shape their contracts the way they see fit, including adjusting or even removing standard warranty and remedy terms. This freedom is protected by law as long as the changes do not clash with public policy or mandatory legal rules.

Companies often agree in advance on compensation for breaches or set limits on liability, but they cannot use these clauses to shield themselves from fraud or serious misconduct. Lastly, if a deal seems one-sided or harmful, the courts can step in to restore fairness.