The conflict that escalated in Iran in late February 2026 has imposed a question on every contractor working on a Gulf construction project: who bears the additional cost? Supply chains have been disrupted. Insurance premiums have risen sharply. Materials that were available at the time of contracting are now scarce or prohibitively expensive, and labour costs have followed. The commercial consequences are real, and in most cases the contract will say, clearly enough, that the contractor bears the risk. That contractual position is not, however, the end of the analysis. The Oman Civil Transactions Law (Royal Decree No. 29/2013) contains within it a hardship doctrine that is capable, in the right circumstances, of overriding contractual risk allocation entirely. For contractors with active projects in Oman, understanding that doctrine and acting on it without delay is now a matter of practical urgency.
Article 159 of the Oman Civil Transactions Law provides that where exceptional general circumstances arise which were unforeseeable at the time of contracting, and where the performance of a contractual obligation, while not impossible, becomes so excessively burdensome as to threaten the obligor with grave loss, a court may reduce that burdensome obligation to a reasonable limit, having regard to the interests of both parties. The article then provides that any agreement to the contrary shall be void.
That closing sentence is of fundamental significance. It means that the hardship doctrine is not a default which parties can exclude by agreement. The Omani Supreme Court has confirmed that Article 159 is a rule of public policy. The voidness of any contrary agreement is absolute: it does not require the contractor to take any step to invoke it, and the mere fact of having signed a contract with comprehensive risk allocation provisions does not constitute a waiver. The right to invoke Article 159, where its conditions are met, exists as a matter of statute and operates above the contractual framework.
The right to invoke the hardship doctrine under Omani law exists as a matter of statute. It cannot be removed by contract, and no risk allocation clause, however comprehensively drafted, can displace it.
The Omani Supreme Court, in Appeal No. 587/2020 and in the earlier Decision No. 141/91, confirmed that Article 159 imposes four conditions which must each be satisfied before a court will intervene.
The first condition is that the event must be exceptional and of a general character. The Supreme Court in Appeal No. 587/2020 drew a clear distinction between events of a general public character, identifying war, flood, and earthquake as paradigm examples, and private circumstances specific to the obligor which do not qualify. A regional armed conflict plainly falls within the former category.
The second condition is that the event must have been unforeseeable at the time of contracting. The Supreme Court applies an objective standard: the question is not whether this particular contractor foresaw the event, but whether a reasonable contractor in its position at the date of signature could have done so. For contracts concluded before February 2026, the onset of hostilities several months into the project's life was not something that a reasonable contractor would have anticipated or priced for.
The third condition is that performance must remain possible but have become excessively burdensome. This is where the hardship doctrine is distinguished from force majeure under Article 172 of the CTL, which addresses true impossibility of performance. Where the works can still be executed but at a cost that threatens grave financial loss, the contractor falls within Article 159 rather than Article 172. The legal consequence is also different: Article 172 extinguishes the obligation and rescinds the contract, whereas Article 159 adjusts and rebalances it.
The fourth condition is that the burden must threaten grave loss. The Supreme Court confirmed in Appeal No. 587/2020 that this assessment is objective, going to the economics of the contract rather than to the contractor's personal or corporate financial position. Sustained cost escalation across multiple cost categories simultaneously, over the remaining life of a project, provides a strong basis for satisfying this condition.
On an assessment of the four conditions, the conflict in Iran provides contractors on Omani projects with a compelling foundation for an Article 159 claim. The conflict is a general public event of precisely the character the Supreme Court identified as qualifying. It arose after contracts were concluded, satisfying the foreseeability condition for any project that was underway before February 2026. Active construction projects in Oman remain capable of performance, but their cost structures have been materially disrupted across materials, labour, plant, subcontracting, and insurance. The breadth and simultaneity of that disruption is, on an objective assessment, capable of satisfying the grave loss condition.
The comparative position under Egyptian law lends further support. Article 147(2) of the Egyptian Civil Code is substantively identical to Article 159, and the decisions of the Egyptian courts on that provision carry significant persuasive weight in Omani civil law by reason of the shared legislative heritage. The Egyptian Supreme Administrative Court, in Appeal No. 2150/1962, applied the hardship doctrine to a supply contract severely disrupted by geopolitical events causing sudden and material cost escalation, divided the loss equitably between the parties, and granted the contractor partial relief. The factual parallel with the present situation is instructive.
Contractors should approach Article 159 with accurate expectations. The provision does not operate as a damages clause and it does not restore the contractor to a position of full compensation. The court's power is to restore a reasonable contractual balance: to reduce the burdensome obligation to a level that is fair to both parties, having regard to the interests of each. The ordinary commercial risk that the contractor assumed when pricing the project remains with the contractor. It is the extraordinary and unforeseeable excess, attributable to the supervening conflict, that the court is empowered to rebalance.
The contractual risk allocation between the parties will remain relevant at this stage. It will not preclude the court's intervention, since Article 159 renders any contrary agreement void, but it will inform the court's assessment of the extent to which each party should bear the additional burden. A contractor that accepted comprehensive price risk provisions will not recover as much as one that did not. Partial but meaningful recovery, proportionate to the gravity of the supervening event, is the realistic outcome of a well-evidenced claim.
There are three immediate priorities, the first of which is the most time-critical.
Give notice without delay. Construction contracts governed by Omani law typically require formal written notice of a claim within a defined period after the contractor first becomes aware of the event or circumstance giving rise to the claim. Many contracts in current use specify the first occurrence of the relevant event as the trigger for that notice period. The hostilities in Iran commenced in late February 2026 and that date represents the starting point for calculating any notice obligation. Contractors who have not yet served formal notice should seek legal advice immediately. While Omani courts retain some discretion in how they treat late notice, reliance on that discretion is a poor substitute for timely compliance.
Build and preserve the evidence. An Article 159 claim requires objective proof of grave loss. Contractors should compile and maintain a contemporaneous record of all additional costs attributable to the conflict from the date of first impact, categorised by type: materials, labour, plant, running costs, subcontracting, and insurance. Monthly figures should be recorded as they are incurred. A forward projection across the remaining programme should be prepared. The granularity and contemporaneity of that evidence will be decisive in any proceedings.
Review all instructions received since the onset of hostilities. Separately from the civil law route, contractors should review all instructions received from the Engineer or the Employer since February 2026. Instructions that directed a change to the sequence or timing of the works, introduced additional work, or otherwise altered the contractor's obligations in a manner falling within the contractual variation categories may give rise to an independent entitlement to additional payment through the variation mechanism. That route is distinct from the Article 159 claim and should be pursued alongside it.
The hardship doctrine under Omani law is not a residual or theoretical remedy. It is a mandatory statutory right, confirmed by the Omani Supreme Court, which exists to address exactly the kind of extraordinary and unforeseeable event that the Gulf construction industry is presently confronting. Contractors that act promptly, preserve their evidence, and take specialist legal advice are in a position to engage seriously with it. Those that do not may find that the passage of time has foreclosed options that were otherwise available to them.
Disclaimer
This article is provided for general informational purposes only and does not constitute legal advice. The content herein is intended to offer a broad overview of the hardship doctrine under Omani law in the context of recent geopolitical developments and should not be relied upon as a substitute for specific legal counsel tailored to your particular circumstances.
No lawyer-client relationship is created by the publication of, or access to, this article. Readers should seek independent legal advice before taking or refraining from taking any action based on the information contained in this article.
While every effort has been made to ensure the accuracy of the information presented, Said Al Shahry & Partners (SASLO) makes no representations or warranties, express or implied, as to the completeness, accuracy, or currency of the content. Laws and their interpretation are subject to change, and the application of legal principles will vary depending on the specific facts and circumstances of each case.
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