Kuwait’s Civil Code sets out a comprehensive, codified regime for contractual remedies and risk allocation that differs in several material respects from English common law. For cross-border transactions, these differences drive outcomes on damages, specific performance, liquidated damages, hardship and force majeure, limitation of liability, interest, rescission, set-off, and suretyship. This guide outlines the key features and their practical implications, and explains why engaging GLA & Co to localize English-style contracts to Kuwaiti law is essential.

Kuwaiti law treats performance in kind as the primary remedy. Where the obligation remains possible and the creditor gives notice, courts can compel performance, authorize substitute performance at the debtor’s cost, order cure or removal of non-conforming works, and impose coercive penalty fines to secure compliance. If performance would be excessively onerous in the circumstances, judges may confine the creditor to damages. In practice, this means “paper” obligations can translate into operational mandates; drafting must therefore define deliverables, acceptance procedures, standards, and variation mechanics with precision.

Damages are available for non-performance or delay where not excused. As a default rule, damages require prior notice, typically served by formal demand or agreed contractual methods. Notice is excused in defined scenarios, such as when performance has become impossible due to the debtor’s act, the due date is fixed in the contract, or the debtor has declared in writing that it will not perform. The measure of damages follows clear statutory principles: absent a contractual or statutory liquidated amount, courts award the loss and lost profit that naturally flow from the breach and could not reasonably be avoided. In contractual liability, and absent fraud or gross fault, damages are limited to harm that was foreseeable at the time of contracting. Moral (non-pecuniary) harm can be compensable in appropriate cases.

Liquidated Damages

Liquidated damages (agreed damages) are enforceable but subject to judicial moderation. Parties may pre-estimate damages in the contract or later. However, if the debtor proves the sum is grossly exaggerated or the obligation was partially performed, the court must reduce the agreed amount. Conversely, the creditor cannot exceed the agreed sum unless the debtor acted fraudulently or with gross fault. This places a premium on contemporaneous evidence of genuine pre-estimation, linkage to measurable risks, and calibrations for partial performance.

Hardship (imprévision) is a mandatory judicial re-balancing tool. If extraordinary, unforeseeable public events arise after contract formation that render performance excessively onerous (short of impossibility) and threaten serious loss, the judge may reduce the obligation to a reasonable level after weighing both parties’ interests. Any attempt to exclude this power is generally ineffective. Unlike English frustration, which narrowly discharges the contract, Kuwait’s hardship regime preserves the agreement while adjusting performance or counter-performance to restore equity.

Force majeure and impossibility rules allocate risk when performance becomes objectively impossible due to a foreign cause not attributable to the obligor. In bilateral contracts, impossibility typically releases both parties and automatically revokes the contract, with partial impossibility permitting either partial performance or rescission, depending on circumstances. The parties may allocate force majeure risk differently by agreement, including stipulating that the debtor bears that risk, but public-order constraints and good faith principles still apply to how those allocations are interpreted and applied.

Limitation and exclusion of liability are recognized but bounded by mandatory carve-outs. Parties may exclude or limit liability for non-performance or delay, but not for fraud or gross fault. Parties may also extend exoneration to the acts of persons employed to perform the obligation, again excluding fraud and gross fault. Drafting should therefore define categories of fault carefully, align with insurance programs, and ensure carve-outs and caps are coherent with the performance and damages framework.

Interest is prohibited. Any agreement that stipulates interest for the investment of money or for delay in payment is void. Any advantage or commission that is not matched by an equivalent real service actually rendered is re-characterized as interest. While courts may award equitable compensation in limited, unusual monetary harm scenarios (for example, where a solvent debtor refuses to pay a liquidated sum after notice), such awards restore equity and are not a substitute for time-value-of-money charges. For finance-adjacent provisions, pricing mechanics must be grounded in genuine services or value to avoid re-characterization.

Rescission and Repudiation

Rescission and repudiation are governed by a structured statutory architecture. For bilateral contracts, after notice, the creditor may seek rescission with damages. Judges retain discretion to grant a grace period, refuse rescission where the unperformed portion is minor relative to the contract, or tailor remedies to equity. Automatic rescission clauses typically require a court order unless the parties clearly and expressly restrict the judge’s discretion in the particular commercial context. Outside commercial matters, formal notice is often still required even if purportedly waived.

Set-off and withholding rights support risk management. Kuwaiti law recognizes possessory withholding rights tied to duties of care over withheld property and accounting for fruits. Where perishing or deterioration is feared, courts can authorize sale and shift the withholding right to proceeds or compensation. Contractual set-off provisions can and should be drafted to sit comfortably with these baseline rules and with insolvency-related set-off regimes.

Suretyship provides a statutory backbone for guarantee and indemnity-like structures. A surety is bound within the scope of the principal obligation and its accessories, and cannot be liable beyond the principal debt without express agreement. The surety may raise the debtor’s defenses and, absent solidarity, may require the creditor to proceed first against the principal debtor and any pledged securities. If the creditor impairs securities or increases the surety’s risk beyond mandate, the surety may be discharged to that extent. These rules influence how corporate guarantees, parent company supports, and indemnities are structured and enforced.

Practical Drafting Implications

Practical drafting implications for English-style contracts include the following. First, build a robust record for agreed damages: document the risk analysis, link amounts to objective metrics, and include partial-performance adjustments. Second, treat hardship as a live mechanic: implement a local-law-compliant adjustment protocol with notice, temporary relief, senior negotiation, and, if needed, judicial reference, rather than purporting to exclude the doctrine. Third, align liability caps and exclusions with mandatory fraud/gross-fault carve-outs and any allocation of force majeure risk. Fourth, design pricing and default-charge mechanics to reflect real services and avoid interest re-characterization. Fifth, define performance obligations with sufficient specificity to make specific performance workable and fair, including cure periods, acceptance tests, and change control. Sixth, ensure guarantees and indemnities respect suretyship constraints, including clarity on scope, defenses, and security preservation.

These Kuwait-specific levers can materially alter the economics of an English-style risk package. A liquidated damages schedule that “works” under English penalty doctrine may be judicially reduced in Kuwait; a blanket hardship waiver may be ineffective; an elegant interest-substitute fee may be void; and a generic guarantee may be narrowed by surety defenses. The result is that otherwise well-negotiated contracts can deliver different remedial value once scrutinized by Kuwaiti courts.

Conclusion

Kuwait’s remedies and risk-allocation regime blends expansive specific performance tools, codified damages with foreseeability and mitigation limits, judicial moderation of agreed sums, mandatory hardship relief, robust force majeure effects, a strict interest prohibition, and detailed suretyship protections. To ensure that risk allocation is enforceable and value-preserving under Kuwait law, English counsel should consult GLA & Co early. GLA routinely localizes liability frameworks, liquidated damages schedules, hardship and force majeure provisions, pricing mechanics, and guarantee structures so that cross-border contracts are not only negotiated on familiar terms but also executed and enforced effectively in Kuwait.

For more information please contact our Managing Partner, Alex Saleh, at alex.saleh@glaco.com