Introduction
Contracts are the fundamental foundation of any legal relationship between individuals or businesses. They serve as a tool to safeguard rights and clearly define obligations. With the evolution of the legal framework in the Kingdom of Saudi Arabia, governance has become an integral part of the legal structure — ensuring integrity and transparency in managing organizations and commercial entities.
1. The Importance of Contracts in the Saudi Legal System
Contracts in the Kingdom are regulated under the Civil Transactions Law and the Companies Law, both guided by the principles of justice and good faith.
The most common contract types include:
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Sales and purchase agreements
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Construction and service contracts
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Supply and distribution agreements
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Employment and partnership contracts
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Electronic contracts
Accurate legal drafting is crucial to the success of any contractual relationship. Clear terms help reduce disputes and ensure proper fulfillment of all obligations.
2. The Role of Legal Authentication
The Ministry of Justice has adopted an electronic notarization system enabling remote authentication of contracts, powers of attorney, and real estate instruments through licensed notaries.
This development has strengthened trust in legal transactions, reduced fraud risks, and saved both time and cost for clients.
3. Understanding Corporate Governance and Its Importance
Corporate governance refers to the rules and controls that ensure fairness, transparency, and accountability in company management.
In Saudi Arabia, the Corporate Governance Regulations issued by the Capital Market Authority represent the main reference — designed to protect shareholders and enhance confidence in financial markets.
Key Governance Objectives:
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Enhancing transparency and accountability
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Ensuring separation of authorities within the organization
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Protecting shareholders’ and stakeholders’ rights
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Reducing risks of misconduct and mismanagement
4. The Relationship Between Contracts and Governance
Contracts are the practical enforcement of governance principles. They reflect legal obligations drafted with clear terms and subject to professional legal review.
Contracts support governance implementation through daily operations such as management agreements, procurement contracts, supply arrangements, and partnership deals — ensuring regulatory compliance and ethical conduct.
5. Challenges in Contracts and Governance
Despite notable progress, several challenges remain, including:
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Limited awareness of contractual obligations among startups
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Insufficient governance follow-up within small enterprises
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The need for broader digital transformation in contract management
Conclusion
Effective contract drafting and the application of modern governance principles are essential pillars for the sustainability of business and legal practices in the Kingdom.
In line with Saudi Vision 2030, transparency and integrated governance have become key drivers of institutional success and economic growth across the country.