1. Introduction

The Egyptian legal system is primarily based on the French civil legal system, various other European codes and religious law. In practice, religious law is applied only to personal status and family matters which are governed by the religious law of the individual concerned. The fundamental and organic law of Egypt is the Constitution thereof, which Constitution was passed in a referendum in January 2014 (the "Constitution").

As a general principle under the Egyptian Civil Code No. 131 of 1948 (the "Civil Code"), the legal effect of a contract shall be applied only to the parties thereof in which, the rights and obligations under the said contract shall only be enforceable vis-à-vis these parties. This being said that the said legal effect shall not be applied to any third party whether the said effects are rights or obligations and whether the source of obligation is a formal or an informal deed unless the parties agreed otherwise. This general principle is also confirmed by several judgements.

2. Statutes of limitation

According to the Civil Code, any contractual obligation shall be generally prescribed after the lapse of fifteen (15) years unless otherwise determined by law. This period shall be decreased to seven (7) years for commercial obligations providing that the two contracting parties shall be commercial entities in accordance with the Egyptian Commercial Code No. 17 of 1999 (the "Commercial Code").

In this regard, according to several judgements, this period of prescription is conditional upon the non-use of the relevant obligee's right to claim the said contractual obligation unless otherwise agreed between the parties in accordance with the Civil Code.

3. Pacta sunt servanda

The Civil Code adopts the basic principle of "pacta sunt servanda", which principle is also confirmed by several judgements and, therefore, a contract shall have the same enforceability level of the law providing the provisions of such contract shall not contradict the public policy and order provisions in Egypt, otherwise the said contradicted provisions shall be considered null and void in accordance with several judgements.

4. Tort liability

According to the Civil Code and several judgements, the tort liability is generally deemed a matter of public policy in Egypt and may not be waived or limited to a fixed sum of money prior to the occurrence of the tort event. However, tort liability resulting from acts or omissions by subordinates or employees of an obligor may be indemnified against, limited or waived.

It is worth noting that according to the Civil Code and several judgements, injured party/ies may not claim compensation as a result of any unlawful act following the lapse of three (3) years commencing from the date on which the said unlawful act and the responsible person thereof become known to the said injured party. However, in all cases the said claim shall be prescribed following the lapse of fifteen (15) years commencing from the date on which the unlawful act was committed.

5. Liquidated damages

According to the Civil Code and several judgements, contractual liabilities may be limited in a form of liquidated damages or waived except for any liability resulting from gross negligence or fraud. However, the following notes should be taken into consideration:

  • the said liquidated damages may be subject to a judicial review and the amount of the agreed liquidated damages may be decreased if the said amount is excessive noting that any provisions excluding and/or limiting the said judicial review shall be deemed null and void.
  • according to the Civil Code and several judgements, if the incurred losses exceed the agreed liquidated damages, the party incurring such losses may request the competent court to order an additional compensation (i.e. to increase the amount of the liquidated damages) expect if the said losses have been incurred as of a result of such party's fault, fraud, gross negligence and/or misconduct.
  • According to the Civil Code and several judgements, it may be agreed between the parties that an obligor accepts liability for an unforeseen event and/or Force Majeure.
  • while liquidated damages in civil contracts (i.e. in which a public entity is not a party thereto) shall be due in case of non-performance and providing that a number of conditions are being satisfied, liquidated damages in administrative contracts (i.e. in which a public entity is a party thereto) shall be due once a delay in performing an obligation is occurred even if the said public entity did not incur any losses as a result of the said delay. The main rationale behind this differentiation is because the purpose of agreeing on compensation in administrative contracts is maintaining the public utilities performance, which is not the case for civil contracts.

6. Damages

According to the Civil Code and several judgments, anyone commits a fault causing damage to any person shall compensate the said person.

In application of the Civil Code, the competent court shall determine the amount of damages in light of the losses incurred to the injured person and profits from which the said person has been deprived and provided that such suffered losses are interlinked with the fault that is subject of the damages claim noting the following

  • the injured person may claim compensation for the moral prejudice suffered as of the losses incurred thereto.
  • the competent court shall have the right, at its sole discretion, to decide the method of indemnification in light of the relevant circumstances, on a case by case basis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.