Consultancy Agreement in Saudi Arabia: Scope, Fees and Liability

A start-up in Riyadh hired a consulting firm for “a feasibility study and a market entry plan” for SAR 90,000, half paid in advance. Two months later, a 40-page report arrived. The owner says he expected an analysis of three cities and a financial model he could edit. The firm says the contract did not mention that, and asks for the other half. The contract says “consulting services as per the technical proposal”, and the technical proposal is one and a half pages.

How do you define the scope of work in a consultancy agreement?

The words “consulting services” alone open the door to disputes. Write what will actually be delivered: a report with specific content, an analysis of certain data, an editable financial model, an implementation plan, or a number of consulting hours. State what the contract does not cover, and what data the client must provide, and when.

• Deliverables: what they are, in what format, and how many copies or revisions the fee covers.
• Stages: the date of each stage, and from when the period is counted.
• Acceptance: who approves the deliverable, within how many days comments must be sent, and what counts as implied acceptance.
• Change requests: who may request them, how they are priced, and when they affect the schedule.

Some professions need a special licence or are governed by their own law, so check this before contracting.

Does a consultant guarantee the success of the project in Saudi Arabia?

Usually not, but it depends on what he promised. Article 168 of the Civil Transactions Law distinguishes between an obligation where it is enough to use the care of an ordinary person “even if the intended purpose is not achieved” (an obligation of means), and an obligation to achieve a result, which is fulfilled only when the result is achieved.

A consultant who gives an opinion based on correct data and professional standards is not liable because the project did not make a profit. But if he promised to deliver a specific analysis or carry out a specific review, that is an obligation of result, and he cannot escape it by calling it “consulting”. On the other hand, do not write a promise of approval or specific profits in the proposal and then deny it in small print at the bottom of the contract. And a client who withholds data while knowing its effect cannot blame the consultant for every outcome.

Do the rules on contracting (muqawala) apply to a consultancy agreement?

They may. Article 461 defines a contracting agreement (muqawala) as a contract in which the contractor undertakes to make something or perform work for a fee “without being subordinate to the employer or acting as his agent”. So an independent consultant who delivers specific work may fall under this definition. A person who works under the client's management and supervision, full time and for a salary, may have an employment relationship, whatever the contract is called.

If the muqawala rules apply, the consultant must complete the work according to the contract terms and within the agreed period. If no terms or period were set, he must follow accepted practice and finish within a reasonable time suited to the nature of the work (Article 465). If the fee was not set in the contract, he is entitled to a fair market fee (ajr al-mithl) (Article 472).

When are consultant fees due?

As a rule, the client pays the fee when he receives the agreed work, unless agreed otherwise. If the work has several parts or the fee is set per unit, payment is due for what has been completed after it is inspected and accepted, provided the completed part is distinct or significant in relation to the whole work (Article 469).

So completing part of the work does not make the whole fee due, and the client's rejection does not automatically block payment for a stage that was delivered and accepted. Link each payment to a clear stage and a written acceptance standard.

The parties agreed on a study of three cities, then halfway through the client asked to add a fourth city.

If the consultant starts on it without writing down its effect on time and fees, they will disagree later: was it a paid change, or within scope?

One email in which the client agrees to the price and the extra time settles the matter.

What if the delivered work is below what was agreed?

Identify the problem: missing information, a method that was not agreed, a file that does not work, or a delay that defeats the purpose of the service. The phrase “the work is not good” does not show what needs correcting, and the consultant's reply that he “spent a lot of time” does not answer it either.

In muqawala, if the contractor breaches the contract terms during the work, the client may give him formal notice (i'dhar) to correct it within a reasonable period the client sets. If he does not correct it, the client may give the work to someone else at the first contractor's expense, or ask for termination. He may ask for immediate termination if the defect cannot be fixed, or if the contractor delays starting or finishing so much that completion within the period is not expected (Article 466). Outside muqawala, the general rule applies: formal notice, then a request for performance or termination, with compensation where justified (Article 107).

State in the contract who owns the files and tools at the end, and what the client may use. Confidentiality and dispute resolution clauses survive termination unless agreed otherwise (Article 113). If the consultant will process personal data of the company's customers, the company must choose a processor that provides the necessary safeguards and must check its compliance (Article 8 of the Personal Data Protection Law).

This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.

Practical solutions for both sides

If you are the client:

• Ask for a technical proposal that lists the deliverables in detail, and make it a signed annex to the contract.
• Link payments to stages and acceptance, and hold back part of the fee until final delivery.
• Send your comments in writing and specifically within the agreed period, because silence may count as acceptance.
• Provide the required data on time, and record the date you provided it.

If you are the consultant or service provider:

• Write what the work does not include as clearly as what it includes.
• Do not start any extra request before written approval of its effect on time and fees.
• Word your obligation as professional care where you cannot guarantee the result, and do not promise what you cannot control.
• Record any delay by the client in providing data or approvals, because it affects how any delay attributed to you is calculated.

If you have a services contract you want reviewed before signing, or an existing dispute over deliverables or fees, send the contract, the technical proposal and the correspondence on WhatsApp and we will review them with you.