Preparing the wording of a contract
Preparing a contract, and reviewing it before it is signed, is work read in Iraq from Civil Code No. 40 of 1951, published in Official Gazette issue 3015 of 8/9/1951, and then from special statutes where they apply: the Labour Law if the contract is a contract of employment; the Electronic Signature and Electronic Transactions Law No. 78 of 2012 if the signature or the instrument is electronic; and the commercial-agency or trademarks legislation if a franchise or a commercial representation enters the picture. The Law Office of Ali Barakat follows this file from Baghdad, al-Yarmouk, with no branch in another governorate. The detail is on the related pages: what the Civil Code governs in a contract, points to review before signing, hardship and rescission, agreed compensation, and installment sale and the seller's retention of title.
How is a contract formed?
Under article 73, a contract is formed when one party's offer meets the other party's acceptance, with an effect on the subject-matter. Articles 74 and 75 allow the bargain to concern property, or the use of property, or a defined piece of work or a service, or any other subject, provided the obligation is not prohibited by statute and does not conflict with public order or morals. Article 76 extends those general rules to contracts the Code names and to those it does not, together with any special rules for particular civil contracts, or with what the commercial legislation provides if the contract is commercial.
After the contract is carried out, each side is bound by it. Article 146, first paragraph, does not allow a party to withdraw or to vary it except where a legal provision or the parties' joint consent permits. That binding force is the starting point against which any later wording on amendment or termination is read.
Writing, and the electronic signature
The Civil Code does not make writing an element of every contract. Special statutes do, however, require a written form in particular places, including a written employment contract under article 37 of the Labour Law: the employer prepares three written originals; one remains with each side, and the remaining original is filed with دائرة التشغيل والقروض (the Department of Employment and Loans). In dealing with a foreign worker, Instructions No. 1 of 2026 require the contract to be made in Arabic and English, or in the worker's mother tongue. These are forms the file reviews.
The Electronic Signature and Electronic Transactions Law No. 78 of 2012 aims to give legal authority to electronic transactions and to the electronic signature, under article 2. An electronic signature has, in the field of civil, commercial and administrative transactions, the same authority as a handwritten signature if the conditions in article 5 are observed in its creation and it is certified by a certification body, under articles 4 and 5: it must be linked to the signatory alone; the electronic medium must be under the signatory's sole control; any alteration must be detectable; and it must be created in accordance with the procedures laid down by the Ministry of Communications in instructions issued by the Minister.
The Law does not apply, under article 3, second paragraph, to personal-status matters; or to the making of a will or a waqf, or to amending their provisions; or to dispositions of immovable property, including the powers of attorney relating to it, title deeds, and the creation of real rights over it, except leases of such property; or to transactions for which the law prescribes a particular form; or to court procedure, judicial notices, search warrants, arrest warrants and judgments; or to any document that the law requires to be notarised by a notary. Those exclusions are read before an electronic signature is relied on in a particular file.
The Law allows, in places, a challenge to a decision suspending a certification certificate, but that provision does not name a court by name.
What is distinguished from a contract of employment?
If one party works under the direction and supervision of an employer, and under the employer's management, in return for a wage, the definition of a worker in the Labour Law may apply, even if the contract is headed "consultancy" or "professional service". The difference between a consultancy contract and a contract of employment is set out on its page. Labour disputes are a separate path, on their practice page.
Hardship, rescission, agreed compensation, and installment sales
Where unforeseen events of a general and exceptional kind arise, and carrying out the obligation — though still possible — becomes so heavy for the debtor that a serious loss is threatened, article 146, second paragraph, allows the court, after weighing each side's interest, to bring the heavy obligation down to a reasonable measure if justice so requires. A contrary agreement is void. In a contract binding on both sides, a failure by one party to do what the contract requires allows the other, after a formal notice, to ask for rescission and for damages where there is cause; article 177 also allows the court to give the debtor time, or to refuse rescission where the shortfall is slight next to the obligation as a whole. The parties may provide that, on a failure to perform, the contract is to be regarded as rescinded of itself, without a judicial judgment; article 178 still requires a formal notice unless they have expressly agreed that none is needed. The detail is on the page about hardship and rescission.
Article 170 allows the parties to set the amount of compensation ahead of time, in the contract itself or in a later agreement. The agreed sum is not payable if the debtor shows that the creditor has not suffered harm, and it may be brought down if the estimate is shown to be out of proportion or if the original obligation has been carried out in part; any agreement contrary to that rule is void. The detail is on the page about agreed compensation.
Where the price is postponed, article 534 allows the seller to keep title until the whole price has been received, even after the thing sold has already been delivered. Article 574 allows the price to be split into known installments, and allows a stipulation that if one installment is missed on its date the whole price falls due. The detail is on the page about installment sales and retention of title.
Dealing in Basra, franchises, and a foreign party
If the dealing is in Basra, the Civil Code and the special form statutes apply as they apply in other governorates not organised in a region, without this page being presented as a city page or as a branch of the office. The detail is on drafting a contract when dealing in Basra.
A commercial franchise contract is not based on a separate franchise statute whose number is cited here without a published official instrument. It is read from the contract rules in the Civil Code, from a trademark licence if there is one, and from the description "franchise agency" in the commercial-agency instructions if those instructions apply. The detail is on the franchise contract page, distinguished from commercial agency and from a company structure.
If one of the parties is a foreigner, the language of the contract and the law the parties agree to apply are reviewed together with Iraqi mandatory rules that cannot be contracted out of. The detail is on the governing law and the language of the contract. Review of a contract drawn up in more than one language is a separate page, bilingual contract review.
The office is in Baghdad, al-Yarmouk, with no branch in Basra or in another city.
Legal basis and sources
- Civil Code No. 40 of 1951 (Official Gazette No. 3015 of 8/9/1951)
- Electronic Signature and Electronic Transactions Law No. 78 of 2012 (Official Gazette No. 4256 of 5/11/2012)
- Labour Law No. 37 of 2015
Frequently asked questions
Is writing an element of every contract under the Civil Code?
No. Article 73 ties the formation of a contract to offer and acceptance. A written form is imposed by a special statute in particular places, including a written employment contract under article 37 of the Labour Law.
Does an electronic signature have the authority of a handwritten signature?
Yes, in the field of civil, commercial and administrative transactions, if it is certified by a certification body and the conditions in article 5 of Law No. 78 of 2012 are met. The Law does not apply to the matters excluded by article 3, second paragraph, including dispositions of immovable property — other than a lease — and documents that the law requires to be notarised by a notary.
May the parties agree to exclude the rule on unforeseen hardship?
Article 146, second paragraph, provides that every agreement contrary to that rule is void.
Topics in this area
- 01Drafting a contract when dealing in BasraDrafting a contract when dealing in Basra under the federal Civil Code, followed from Baghdad.
- 02What does the Civil Code govern in a contract?How a contract is formed and becomes binding under Civil Code No. 40 of 1951: offer, acceptance and subject-matter.
- 03Points to review in a contract before signingMatters to review before signing: parties and authority, subject-matter, time, rescission, compensation and language.
- 04A consultancy contract, and how it differs from a contract of employmentConsultancy and employment contracts under Labour Law No. 37 of 2015, including article 37 on the written contract.
- 05Drafting a commercial franchise contractA franchise contract is read from the Civil Code, a trademark licence and the 2020 agency instructions, with no published standalone statute or templates.
- 06The governing law and the language of a contract with a foreign partyGoverning law and contract language with a foreign party, read with Iraqi mandatory rules, without naming a court the statute does not name.
- 07Unforeseen hardship and rescission of a contractExceptional general events in article 146, and rescission of two-sided contracts in articles 177 and 178 of the Civil Code.
- 08Installment sales and the seller's retention of titleDeferred-price sales in articles 534 and 574: retention of title and acceleration of the price, even if styled as hire.
- 09Agreed compensation, and when it may be reducedAgreed compensation in Civil Code article 170: when it is due, when it may be reduced, and when more may be claimed.
- 10Drafting an arbitration clause: recurring mistakes and how to avoid themWhat makes an arbitration clause in a contract governed by Iraqi law workable once a dispute arises, and which drafting mistakes keep appearing, under Book Two of Civil Procedure Law No. 83 of 1969.