Short answer: Contract drafting in Iraq follows the Iraqi Civil Code No. 40 of 1951, under which a contract is the binding of an offer by one party to the acceptance of the other in a way that produces its effect on the subject of the contract (Art. 73). The general rules apply to named and unnamed contracts alike (Art. 76(1)); once a contract has taken effect, neither party may withdraw from it or amend it except under a provision of law or by agreement (Art. 146(1)); and special laws apply to particular contracts, such as employment, company, investment and public contracts. This page lists the contract types, the arbitration clause, and what a contract review checks.
Source: Iraqi Civil Code No. 40 of 1951, as amended (Arts. 25, 26, 32, 73–76, 79, 80, 86, 90–93, 106, 127–132, 137–141, 145–146, 150, 155, 166–170, 177–178, 256–259, 288, 506–508, 722–723, 864–866, 891, 900 and 1126); Civil Procedure Law No. 83 of 1969 (Arts. 251–253; Art. 252 in its amended form). The article text is taken from published copies of the laws and has not yet been matched against the Official Gazette.
Author: Othman Al-Juboori, Founder and Managing Director, Member of the Iraqi Bar Association
Al-Taswia Legal Services Company has 15 lawyers, and contract drafting and review is one of its areas of work. This page sets out the main provisions to consider when drafting or reviewing a contract, as stated in the text of the law.
Contract types
The Civil Code allows a contract to cover goods, to transfer or preserve them or consume them by use; the usufruct of goods, with or without consideration; a specific work or a specific service (Art. 74); and any other thing whose undertaking is not prohibited by law or contrary to public order or morals (Art. 75). The rules that belong to particular civil contracts are in the chapters set aside for them, and the commercial laws set the special rules for commercial contracts (Art. 76(2)).
| Contract type | Where it is governed | Points the text sets for drafting |
|---|---|---|
| Sale | Civil Code, sale chapter (from Art. 506) | Sale is the exchange of property for property (Art. 506); sale of the thing for cash is absolute sale, cash for cash is currency exchange, and thing for thing is barter (Art. 507). The sale of real estate is not formed unless it is registered in the competent department and meets the form the law prescribes (Art. 508; see also Art. 1126(2)). |
| Lease | Civil Code, lease chapter (from Art. 722) | Lease is the transfer of a known benefit for a known consideration for a known period, and the lessor undertakes to let the lessee use the leased property (Art. 722). The text requires, for the lease to be formed, that each party be of sound mind and discerning at the time of the contract; for it to take effect, that neither party be under interdiction, and that the lessor be the owner who leases the property, or the owner's agent or guardian (Art. 723). |
| Employment | Civil Code Art. 900 and the Labour Law No. 37 of 2015 | An employment contract is one where a party undertakes to devote that party's work to the service of the other, under the other's direction and management, for a wage; it differs from the contracting contract because the employer has the right to manage and direct the worker's efforts, or at least to supervise them (Art. 900(1)–(2)). |
| Contracting (muqawala) | Civil Code, contracting chapter (Arts. 864–890) | Contracting is a contract in which one party undertakes to make a thing or perform a work for a wage the other undertakes to pay (Art. 864). The contractor may undertake the work only, with the employer supplying the material, or the work and the material together (Art. 865); a contractor who supplies all or part of the material is responsible for its quality (Art. 866). |
| Supply | General rules (Art. 76(1)); special rules where the contract is a public contract | The Code does not set a separate chapter for a supply contract. The general rules apply to named and unnamed contracts (Art. 76(1)), and a contract may cover any thing whose undertaking is lawful (Art. 75). For federal public bodies, the Public Contracts Execution Instructions No. 1 of 2025 cover public works, consultancy, non-consultancy services and supply contracts (Art. 2/First). |
| Partnership (company contract) | Companies Law No. 21 of 1997, Art. 4 | The Companies Law defines a company as a contract by which two or more persons undertake that each will contribute to an economic project by providing a share of money or work, in order to divide the profit or loss arising from it (Art. 4/First). The Civil Code chapter on partnership (Arts. 626–683) is shown in the published copies of the Code as repealed, so the partnership contract is drafted under the Companies Law. |
| Company formation | Companies Law No. 21 of 1997 | The company contract must state the company's head office, which must be in Iraq (Art. 13/second). The company registration page sets out the procedure. |
| Commercial agency | Commercial Agency Regulation Law No. 79 of 2017; Civil Code Art. 76(1) for the general rules | The agency contract is registered with the Companies Registrar after it is authenticated as the law requires (Art. 10). Agency contracts must be on behalf of companies that produce or manufacture the goods and services, or through the original company that is owned by the producing or manufacturing company and officially authorised to grant sub-agencies in Iraq (Art. 14). The principal may not terminate the agency contract or decline to renew it without a justifying reason; it may be terminated by agreement, or under an agreement between the parties that sets the arbitration procedures, the venue and the governing law (Art. 20). |
| Investment | Investment Law No. 13 of 2006, as amended | Investment contracts are drafted under the Investment Law together with the general rules of the Civil Code (Art. 76(1)); the licence and the terms of the investment are read from the law and the licence itself. |
| Government contracts | Public Contracts Execution Instructions No. 1 of 2025; Government Contracts Execution Instructions No. 2 of 2014 for contracts concluded under them; Civil Code Art. 891 for public utility concessions | The 2025 Instructions were published in Official Gazette No. 4849 on 17 November 2025 (Art. 2/First on scope; Art. 37/First on the standard documents; Art. 37/Third on Iraqi law and the jurisdiction of the Iraqi courts); contracts concluded under the 2014 Instructions stay subject to them (Art. 41). A public utility concession is a contract between the government and an individual or company to manage an economic public utility for a fixed period under a law (Art. 891(1)). |
Because these terms in public contracts are set by the Instructions, the review of a government contract starts from the Instructions and the standard documents, and then reads the contract against them.
What a contract is and how it is formed
- A contract is the binding of an offer by one party to the acceptance of the other in a way that produces its effect on the subject of the contract (Art. 73).
- An offer or acceptance may be made orally, in writing, by a commonly used gesture, by an exchange of conduct showing consent, or by any other conduct whose meaning as consent is not left in doubt by the circumstances (Art. 79).
- The display of goods together with a statement of their cost is an offer (Art. 80(1)). Publication, advertising and the statement of quoted rates are not, where in doubt, an offer; they are an invitation to negotiate (Art. 80(2)).
- Acceptance matches the offer if the parties agree on all essential matters they negotiated (Art. 86(1)). If they agree on all essential matters and reserve detailed matters to be agreed later, without providing that the contract is not formed absent agreement on them, the contract is regarded as concluded (Art. 86(2)).
Contract elements checked at the drafting stage
| Element | What the text says | Article |
|---|---|---|
| Capacity of the parties | Every person has capacity to contract unless the law removes or limits it; the age of majority is eighteen full years | 93, 106 |
| Object | Specified so as to remove gross uncertainty, though it suffices that the object is known to the parties; an object that is grossly uncertain makes the contract void | 128(1)–(2), 137(3) |
| Lawfulness of the object | Not prohibited by law and not contrary to public order or morals, otherwise void | 130(1) |
| Impossibility | If the object is absolutely impossible the contract is void | 127(1) |
| Cause | The contract is void if the parties undertake without a cause or for a cause prohibited by law and contrary to public order or morals; every obligation is presumed to have a lawful cause even if it is not stated in the contract, unless proof to the contrary is established | 132(1)–(2) |
| Form | If the law prescribes a form for the contract it is not formed without that form, unless a provision provides otherwise, and the form must also be observed for any amendment to the contract | 90(1)–(2) |
| Attached conditions | A contract may carry a condition that confirms its effect, suits it, or is customary in practice, or a condition benefiting a party or a third party, if not prohibited by law or contrary to public order or morals | 131(1)–(2) |
| Suspensive condition | A contract subject to a suspensive condition takes effect only if the condition is fulfilled | 288 |
| Agreed compensation | The parties may fix the amount of compensation in advance by stating it in the contract or in a later agreement | 170(1) |
Preliminary agreement and earnest money
- A preliminary agreement to conclude a specified contract in the future is valid only if the essential matters of the intended contract and the period within which it is to be concluded are specified (Art. 91(1)).
- Payment of earnest money is evidence that the contract has become final and cannot be withdrawn from, unless the agreement provides otherwise. If the parties agree that earnest money is compensation for withdrawal, each may withdraw; a payer who withdraws forfeits it and a recipient who withdraws returns it doubled (Art. 92(1)–(2)).
Arbitration clause
An arbitration clause is the part of a contract by which the parties agree to refer their disputes to arbitrators. Under the Civil Procedure Law No. 83 of 1969:
- The parties may agree to arbitrate a specific dispute, and may also agree to arbitrate all disputes arising from the performance of a specific contract (Art. 251).
- The agreement to arbitrate is proved only in writing, and it may also be made during the proceedings (Art. 252, as amended).
- Where the parties have agreed to arbitrate a dispute, a suit on it may not be brought before the courts until arbitration is exhausted. If one party sues regardless and the other does not object at the first hearing, the arbitration clause is regarded as cancelled; if the other party objects, the court stays the case until the arbitrators' award is issued (Art. 253).
Because Art. 251 allows either a specific dispute or all disputes arising from the performance of a specific contract, the clause states which of the two it covers. It is put in writing (Art. 252), and the contract also states the law it is governed by (see "A contract connected with another country" below). Recognition and enforcement of foreign arbitral awards in Iraq are covered on the arbitration page.
Contract review and Arabic–English contracts
Reviewing a contract means checking its terms against the elements in the table above: the parties and their capacity, the object, cause and form, conditions and time limits, agreed compensation, notice and rescission procedures, any arbitration clause, and the governing law where there is a foreign element. For the contract types above, the review also reads the contract against the special law that governs it, such as the Labour Law for employment or the Instructions for a public contract.
Where a contract exists in Arabic and English, the review compares the two texts term by term. The Code's rule of interpretation looks to purposes and meanings, not words and forms (Art. 155(1)), so a difference between the two texts is identified and corrected in the drafting rather than left to interpretation.
Nullity and its effect
- A void contract is not formed and produces no effect; if the contract is void, the parties are restored to their position before the contract, and if that is impossible an equivalent compensation may be awarded (Art. 138(1)–(2)).
- A void contract is one that is not valid in itself or, as to description, because of some of its external attributes. A contract is void if there is a defect in its essential element (rukn), and is also void if some of its attributes are defective, for example where the subject is grossly uncertain or the contract does not meet the form required by law (Art. 137(1)–(3)).
- If a contract is void in part, only that part is void and the rest stays valid, unless it appears the contract would not have been concluded without the void part (Art. 139).
- A void contract that meets the elements of another contract is valid as that contract if the parties' intention was directed to it (Art. 140).
- Any interested person may invoke nullity, the court may rule it of its own motion, and nullity is not cured by ratification (Art. 141).
Performance and interpretation
- Once a contract has taken effect it is binding, and neither party may withdraw from it or amend it except under a provision of law or by agreement (Art. 146(1)). Whatever the object of the contract, a party can be compelled to perform the obligation (Art. 145).
- A contract must be performed according to its contents and in a manner consistent with good faith; it does not bind the contracting party only to what it states but also covers what follows from it under the law, custom and equity according to the nature of the obligation (Art. 150(1)–(2)).
- In contracts, what counts is purposes and meanings, not words and forms (Art. 155(1)). Doubt is interpreted in favour of the debtor (Art. 166).
- In contracts of adhesion, acceptance is limited to mere submission to a draft contract with fixed terms set by the offeror, which is not open to discussion (Art. 167(1)). If the contract was concluded by adhesion and contains arbitrary terms, the court may amend them or relieve the adhering party of them as justice requires, and any agreement to the contrary is void (Art. 167(2)).
Breach and its consequences
- If the obligor cannot perform in kind, the obligor is ordered to pay compensation, unless the obligor proves that the impossibility arose from a foreign cause beyond the obligor's control; the same applies to delay (Art. 168).
- If compensation is not fixed in the contract or by law, the court assesses it, covering the loss suffered and the gain lost as a natural result of the debtor's non-performance or delay (Art. 169(1)–(2)).
- Compensation is due only after the debtor is put on notice unless the law provides otherwise; notice is given by a warning and may be given by any other written request (Arts. 256 and 257).
- In bilateral contracts, if one party does not perform, the other may after notice request rescission with compensation where appropriate; the court may grant the debtor a time limit or refuse rescission if what was not performed is minor relative to the whole obligation (Art. 177(1)). The parties may agree that the contract is regarded as rescinded of its own accord, without a court judgment; this does not dispense with notice unless the parties expressly agree that notice is unnecessary (Art. 178).
- The parties may agree that the debtor bears the risk of sudden events and force majeure, and may exempt the debtor from all liability for non-performance of the contractual obligation, except liability arising from the debtor's fraud or gross fault (Art. 259(1)–(2)).
A contract connected with another country
- Contractual obligations are governed by the law of the state where the parties share a domicile; if their domiciles differ, by the law of the state where the contract was concluded, unless the parties agree, or the circumstances show, that another law is intended (Art. 25(1)).
- The law of the location of an immovable governs contracts concluded in respect of it (Art. 25(2)).
- The form of contracts is governed by the law of the state where they were concluded (Art. 26).
- A provision of foreign law may not be applied if it conflicts with public order or morals in Iraq (Art. 32).
FAQ
What makes a contract binding under the Iraqi Civil Code?
A contract is the binding of an offer by one party to the acceptance of the other in a way that produces its effect on the subject of the contract (Art. 73). Acceptance matches the offer if the parties agree on all the essential matters they negotiated (Art. 86(1)). Once the contract has taken effect it is binding, and neither party may withdraw from it or amend it except under a provision of law or by agreement (Art. 146(1)).
Does a contract have to be in writing?
As a general rule the Code does not require writing: an offer or acceptance may be oral, written, by a commonly used gesture, by an exchange of conduct showing consent, or by any other conduct whose meaning as consent is not left in doubt (Art. 79). But if the law prescribes a form for a contract, it is not formed without that form, unless a provision provides otherwise, and the form must also be observed for any amendment (Art. 90(1)–(2)). Two examples: the sale of real estate is not formed unless it is registered in the competent department and meets the form the law prescribes (Art. 508), and an agreement to arbitrate is proved only in writing (Civil Procedure Law No. 83 of 1969, Art. 252, as amended).
When is a contract void, and what is checked when drafting a contract?
A contract is void when there is a defect in its essential element (rukn), or when some of its attributes are defective, for example where the subject is grossly uncertain or the contract does not meet the form required by law (Art. 137(1)–(3)). Its object must be specified so as to remove gross uncertainty (Art. 128(1)) and must not be prohibited by law or contrary to public order or morals (Art. 130(1)). A void contract is not formed and produces no effect; the parties are restored to their position before the contract, and nullity is not cured by ratification (Arts. 138(1)–(2) and 141).
If one condition in a contract is void, is the whole contract void?
Not necessarily. If a condition is prohibited by law or contrary to public order or morals, the condition is disregarded and the contract stays valid, unless the condition was the motive for contracting, in which case the contract is void too (Art. 131(2)). If a contract is void in part, only that part is void, unless it appears the contract would not have been concluded without the void part (Art. 139).
Can compensation for breach be fixed in advance in the contract?
Yes. The parties may fix the amount of compensation in advance by stating it in the contract or in a later agreement (Art. 170(1)). It is not due if the debtor proves the creditor suffered no harm, and it may be reduced if the debtor proves it excessive or that the original obligation was partly performed; any agreement contrary to this is void (Art. 170(2)).
What happens if circumstances change after the contract is made?
If exceptional general events that could not be foreseen occur, and performance of the contractual obligation, though not impossible, becomes onerous to the debtor so as to threaten the debtor with exorbitant loss, the court may, after balancing the interests of both parties, reduce the onerous obligation to a reasonable level if justice so requires; any agreement to the contrary is void (Art. 146(2)).
Can the parties agree to arbitrate disputes arising from a contract?
Yes. Under the Civil Procedure Law No. 83 of 1969, the parties may agree to arbitrate a specific dispute, and may also agree to arbitrate all disputes arising from the performance of a specific contract (Art. 251). The agreement is proved only in writing, and may also be made during the proceedings (Art. 252, as amended). Where the parties have agreed to arbitrate a dispute, a suit on it may not be brought before the courts until arbitration is exhausted; if one party sues regardless and the other does not object at the first hearing, the arbitration clause is regarded as cancelled, and if the other party objects, the court stays the case until the arbitrators' award is issued (Art. 253).
Source: Iraqi Civil Code No. 40 of 1951, as amended; Civil Procedure Law No. 83 of 1969. This page provides general legal information.
Related services
Among the legal services of Al-Taswia Legal Services Company: contract drafting and review, including arbitration clauses and bilingual Arabic–English contracts, and commercial agencies. The company is based in Baghdad and has a presence in Basrah.
See also
- Arbitration and enforcement of foreign arbitral awards in Iraq
- Iraqi labour law
- Company registration in Iraq
- Iraqi civil law
- Commercial agency in Iraq
Contact information
Al-Taswia Legal Services Company
- Phone: +964 771 100 2200
- Email: info@al-taswia.com
- Hours: Saturday–Thursday, 5:00–9:00 PM | Friday: closed
- Working languages: Arabic, English, Sorani Kurdish and Chinese