Contractor
Synonyms: Building Contractor، General Contractor، Main Contractor
Last updated: 2026-09-25
Short Definition
A contractor is a natural or legal person who, under a construction contract, undertakes to carry out building, construction, installation or maintenance work for the employer in return for payment, without being the employer's subordinate or agent.
Overview
Legal Basis
The construction contract is governed by the Civil Transactions Law (M/191 dated 29/11/1444H), Arts. 461–478, including: definition (461), completion within the agreed time (465), the owner's right to give notice and then complete at the contractor's cost or rescind (466), payment of the price (469) and the fixed lump-sum price (471). The Saudi Building Code Implementation Law (M/43 dated 26/4/1438H) requires execution to be contracted to a practice-licence holder (Art. 7) and makes the executor jointly liable for collapse and defects (Art. 8(2)). The Contractors Classification Law (M/9 dated 18/1/1443H) requires classification for government projects subject to classification (Art. 3) and penalizes violations by downgrading, suspending classification with a ban on renewal of up to five years, or cancellation (Art. 15). The Saudi Contractors Authority was established by Cabinet Decision No. 510 dated 23/11/1436H.
Practical Example
An owner in Taif contracts a Balady-classified contractor to build a villa under a lump-sum contract of SAR 1,200,000 over 12 months, with stage-linked payments, a 10% retention from each payment until final acceptance, and agreed delay damages of 0.1% of the contract value per day capped at 10%. The contractor is 40 days late without excuse, so the owner is entitled to 40 × 1,200 = SAR 48,000, deducted from amounts due. When the contractor failed to fix waterproofing defects despite formal notice, the owner had another contractor correct them at the first contractor's expense under Art. 466 of the Civil Transactions Law.
Common Mistakes
- ✗Contracting an unclassified contractor or on a verbal agreement, then being unable to obtain a permit or prove obligations in a dispute.
- ✗A contract without a bill of quantities or clear specifications, opening the door to extra claims and quality disputes.
- ✗Paying large advances not matched by completed work or guarantees.
- ✗No clauses on delay damages, change orders, or provisional and final acceptance.
- ✗Confusing the contractor's responsibility with the supervising office's and failing to appoint an independent supervisor.
International Differences
Many countries license and classify contractors: in the UAE, municipalities classify contractors in categories that cap project size, and Turkey introduced a contractor authorization certificate system (yapı müteahhitliği yetki belgesi) to determine eligibility. In Egypt and most Arab countries, the civil code imposes a ten-year (decennial) liability on the contractor and engineer. Saudi Arabia differs in that the construction-contract chapter of the Civil Transactions Law contains no decennial liability article; instead, the Building Code Implementation Law establishes joint liability for a period set by its regulations, complemented by mandatory 10-year inherent defects insurance.
