Creating a Commercial Contract in Egypt: A Legal Guide

Drafting a commercial contract in Egypt requires understanding the Egyptian legal framework and following key steps. Egyptian contract law is rooted in the Civil Code (Law No. 131 of 1948) and related statutes.  A valid contract in Egypt arises from the mutual consent of legally capable parties on a lawful subject with a legitimate cause, and it must be performed in good faith.  In practice, parties negotiate and document clear terms – then sign the agreement (often witnessed or notarized for evidence) – to ensure the contract is enforceable. This guide explains the legal steps to form a contract, the main types of commercial contracts, essential clauses and formalities (like notarization), and practical issues such as franchise deals, foreign parties, termination, and arbitration. Professional legal advice is strongly recommended to tailor any agreement to Egyptian law and protect your interests .

Legal Steps to Create a Contract in Egypt

To create an Egyptian contract, the parties must ensure the basic formation requirements are met.  First, one party must make a clear offer and the other must accept it without modification.  This “meeting of minds” on all essential terms must be free of mistakes, fraud, duress or coercion .  Both parties must have legal capacity (for example, be adults of sound mind) , and the agreement’s object and purpose must be lawful (not illegal or against public order) .  Unlike common-law systems, Egyptian law does not require monetary “consideration,” but each obligation in the contract must have a legitimate cause or reason .

These elements offer and acceptance, capacity, free consent, lawful object and cause – are fundamental in all Egyptian contracts . In practice, parties usually reduce their agreement to writing (in Arabic or bilingually) to avoid disputes . The written contract is then signed by authorized representatives of each party. Although Egyptian law does not mandate written form for most contracts , putting terms in a document helps prove the agreement’s existence and contents. Once executed, the contract binds the parties to perform their obligations faithfully and in good faith . Because the legal landscape can be complex, many businesses involve a qualified lawyer when drafting or reviewing contracts to ensure compliance and clarity .

Types of Commercial Contracts in Egypt

Egyptian law recognizes all the usual commercial contract forms . Common types include:

• Partnership and Joint Venture Agreements: arrangements for sharing profits, capital and management in a venture or project .

• Lease and Sale Contracts: for renting or buying assets, property or equipment. Leases are governed by the Civil Code, and long-term property transfers must meet formal rules.

• Agency and Distribution Agreements: one party (the agent/distributor) sells goods for or on behalf of another (the principal). These are regulated by the Commercial Code and may require registration – for example, foreign agents must register with the General Authority for Import & Export Control (GOEIC) .

• Franchise Agreements: see below. Egypt has no special franchise law, but franchises are treated under general contract and IP law .

• Employment Contracts: governed by Egypt’s Labor Law and Civil Code, setting terms like salary, hours and termination conditions. These must be drafted in Arabic and provided in triplicate .

• Construction Contracts: for building works and infrastructure, often incorporating FIDIC-style terms but subject to Egyptian law. These specify scope, timelines, payment, guarantees and penalties.

• Loan and Financing Agreements: governed by the Civil Code and banking laws. These detail loan amounts, repayment, interest, and security (e.g. mortgages or pledges) .

• Other Commercial Contracts: including partnership or joint venture contracts, non-disclosure agreements, supply and maintenance contracts, licensing agreements (for IP or technology), and service contracts. Each is governed by general contract principles and any sector-specific statutes (for instance, company law, agency law or IP laws).

In short, Egyptian law recognizes employment, service/consultancy agreements, lease (rental) agreements, sales contracts (for goods or real estate), construction/works contracts, distribution or franchise agreements, loan/finance contracts, agency and partnership agreements, and more . Each contract type has its own features and sometimes extra rules (e.g. labor law for employees, registration laws for property sales).

Franchise Agreements in Egypt

Egypt does not have a dedicated franchise law. Instead, franchise agreements are treated like any other commercial contract, drawing on the Civil and Commercial Codes plus intellectual property law . A typical franchise agreement grants a franchisee the right to use the franchisor’s trademark, brand, know-how or business system in exchange for fees or royalties . In legal terms it is viewed as a hybrid of a trademark/license agreement and a service contract. The franchisor’s trademark must be registered in Egypt for protection, and the contract will include terms on support, fees, duration and any exclusivity. There is no special franchise office or registry – parties rely on the contract wording and general law. (Note: Egypt’s Competition Law may limit absolute territorial exclusivity if one party has a dominant market position.)

Because there is no franchise-specific statute, it is especially important to carefully draft these contracts. They should clearly specify the parties’ rights, payment terms, territory, quality standards and renewal or termination conditions. Lawyers often incorporate arbitration clauses (see below) to resolve any disputes. In essence, successful franchise agreements in Egypt depend on sound contract drafting and adherence to trademark and competition regulations .

Essential Elements of a Contract

Every Egyptian contract must include certain fundamental parts or elements to be valid .  In practice, a well-drafted contract will contain at least:

• Offer and Acceptance: One party must make a definite proposal, and the other must accept it exactly as offered . If the acceptance changes the terms, it is legally a counter-offer, not an acceptance.

• Capacity: All signatories must have legal capacity (e.g. they must be of age and of sound mind) . Contracts signed by minors or those under legal disability are voidable.

• Free Consent: The agreement must be entered into voluntarily. It cannot be the result of fraud, coercion, mistake or undue influence . If consent is vitiated (for example, by deception), the contract may later be canceled.

• Lawful Object: The subject matter and purpose of the contract must be legal and not contrary to Egyptian public order or morals . Any contract for an illegal act (such as a drug transaction) is void.

• Legitimate Cause (Consideration): Unlike English law, Egyptian law does not require “consideration” in the common-law sense. However, each obligation must have a legal cause – essentially a valid reason for the duty. Gratuitous promises without cause are not binding unless formalized (e.g. as a gift under the Civil Code).

In addition to these core elements, a commercial contract typically includes the identification of the parties, the exact obligations of each side (price, delivery, scope of work, etc.), duration and termination clauses, payment terms, and any conditions precedent. It should also state the governing law (usually Egyptian law, unless parties choose otherwise within limits) and a dispute resolution provision (see arbitration below "FAQs Section"). Including force majeure, confidentiality, and notice clauses can also protect the parties. The aim is to cover all contingencies so the contract “binds the parties to be performed in accordance with its contents” .

Notarization and Formalities for Contracts

Under Egyptian law, most contracts do not need to be notarized by default. Article 677 of the Civil Code expressly imposes no general writing or notarization requirement . Parties are free to contract orally, in writing or electronically, and oral agreements are generally valid and enforceable in civil courts . However, certain contracts must meet formalities to be effective against third parties or for official record-keeping .

Key examples of mandatory formalities include:

• Real Estate Transfers and Long Leases: Any sale or gift of land or buildings must be notarized and registered with the Real Estate Registry. Similarly, leases of immovable property longer than 9 years (or leases paid in advance for more than 3 years) require registration . These formalities protect buyers or lessees against future claims and ensure title is transferred.

• Mortgages and Pledges: A mortgage on real estate must be notarized and recorded in the land registry to be valid against third parties . Pledges on movable assets (like equipment) also generally require notarization and registration under the Civil Code.

• Employment Contracts: By law, employment agreements must be drafted in Arabic and provided in triplicate (one copy each to the employer, employee and the Social Insurance office) . This is technically a writing requirement, but notarization is not typically required beyond this (the Arabic triplicate requirement is for labor regulation, not a notary act).

• Commercial Agency Agreements: Under Law No. 120/1982 (Commercial Agency Law), a commercial agent (who sells goods for commission) must register their contract with the official Commercial Agents Register at GOEIC . The agreement itself should be notarized or attested and submitted to GOEIC to gain the statutory protections of that law.

• Companies and Official Filings: Formation documents (like articles of association) and share transfers of Egyptian companies must be notarized and filed with the Companies Registrar under the Companies Law. These are corporate formalities rather than basic contract requirements, but they affect contractual operations.

In summary, only contracts of certain types require notarization/registration for full legal effect . For example, selling a house without registering the deed will not transfer title to a third party. Many routine commercial contracts (such as a services agreement between companies) do not need to be notarized to be valid, although parties may choose to notarize them as extra proof. As one legal guide notes, agreements related to real estate, company formation and some commercial deals “often require notarization” to be officially recognized . In all cases, it is wise to check if a particular contract type triggers any Egyptian formalities.

Due Diligence for Contracts

Before signing a major contract in Egypt, conducting thorough due diligence is critical. Due diligence is the comprehensive review of the counterparty and transaction to uncover any hidden risks or obligations . Legally, this means verifying the other party’s corporate status, licenses, and compliance. For example, one should examine:

• The company’s legal status: Confirm the business is properly registered, check its ownership structure, board resolutions and any special licenses required by law (e.g. for certain trades or foreign investment).

• Financial and tax status: Review audited financial statements, debt levels, tax compliance and potential liabilities.

• Existing obligations and contracts: Audit any major contracts the counterparty has (such as leases, supply agreements, loans or agency contracts). A contractual obligations audit will flag clauses or liabilities that might conflict with your proposed deal .

• Regulatory compliance: Ensure the company complies with labor, environmental, health, safety and industry-specific regulations.

A professional due diligence investigation (often involving lawyers and financial advisors) helps mitigate risk and structure the deal properly . It should culminate in a report summarizing findings – for instance, any ongoing litigation, contingent liabilities, or regulatory issues. By uncovering problems in advance, you can negotiate protections (like indemnities or price adjustments) or even decide not to proceed. In Egypt’s evolving business environment, due diligence is indispensable for safeguarding investments .

Contract Drafting and Legal Services

Given the complexity of Egyptian law, legal expertise is invaluable when drafting and reviewing contracts. Specialized lawyers who understand local rules can help ensure agreements are enforceable and tailored to your needs . For example, they can incorporate mandatory clauses required by Egyptian law (such as termination notice periods under labor law, or specifying the governing law and dispute resolution) and can translate and interpret terms between Arabic and foreign languages.

It is wise to consult a contract-drafting attorney in situations such as：

• Complex or high-value transactions (mergers, joint ventures, large investments) .

• Partnership or shareholder agreements for new ventures.

• International deals requiring coordination of Egyptian law with foreign law .

• Any case where ambiguity or gaps could lead to disputes.

A skilled lawyer will draft clear terms, negotiate favorable conditions, and include dispute-resolution mechanisms (e.g. arbitration clauses). Their role is to protect your interests and provide peace of mind that the contract is binding and compliant . In short, involving legal drafting services can save time and money by avoiding future litigation or enforcement problems.

FAQs

Do Contracts in Egypt Need to Be Notarized?

Not all contracts in Egypt must be notarized. Typically, only certain categories of agreements require it. As noted above, transactions involving real estate (sales, long leases, mortgages) must be notarized and registered . Articles of incorporation and amendments for companies also go before a notary. Contracts governed by special statutes – such as commercial agency agreements (which must be registered) – similarly involve notary or official filings .

By contrast, most ordinary commercial contracts (like supply contracts or service agreements) do not legally have to be notarized to be valid . However, parties often notarize agreements voluntarily to add evidentiary weight. As one guide summarizes: “Contracts related to real estate, company formation and certain commercial agreements often require notarization” . So, unless your contract falls into a specified category, notarization is optional – albeit commonly done for safety.

How Can I Terminate a Commercial Contract in Egypt?

A commercial contract in Egypt can be ended in several ways. The simplest is mutual consent: if both parties agree to cancel or renegotiate the deal, they may do so at any time. Otherwise, contracts generally remain binding until performance or fulfillment of the obligations .

If one party breaches a fundamental term (for example, fails to pay or deliver as promised), the other party can terminate the contract due to that default. Egyptian law allows rescission when a basic obligation is unmet – essentially, the non-breaching party gives notice and can treat the contract as ended . For instance, if a buyer never pays, the seller may terminate and claim damages. Note that many contracts include explicit termination clauses (requiring notice periods or conditions); courts typically enforce those terms if they are clear.

In specific areas like construction, Article 663 of the Civil Code even permits an employer to stop performance or terminate for convenience (at any time) provided it compensates the contractor for work done and lost profit . Generally, parties should follow any termination procedure set out in their contract. If there is a dispute, either party may seek a court order to declare the contract rescinded (ending it officially) – courts have discretion, for example allowing extra time to cure minor breaches. Overall, a commercial contract can end by fulfillment, breach (with proper notice), mutual agreement, or by court-authorized rescission under the Civil Code .

How Can a Foreign Company Sign a Contract with an Egyptian Business?

Foreign companies are permitted to contract with Egyptian entities, but there are practical formalities. A key rule is language: contracts can be bilingual, but Egypt requires that any dispute be decided on the Arabic text . In other words, it’s safest to have an Arabic version of the contract or an official translation, because Egyptian courts and authorities will default to the Arabic wording.

When a foreign company signs outside Egypt, the signature and contract may need legalization. In practice this means the document is notarized in the foreign country, then authenticated by the foreign Chamber of Commerce and by the Egyptian embassy or consulate . For example, GOEIC rules state that a contract issued by a foreign company must be attested by the foreign authority and certified by the Egyptian consulate . If the contract was drafted in a language other than Arabic (or English), the foreign-signed document must be submitted with an approved Arabic translation . These steps ensure the Egyptian counterparties and officials recognize the foreign execution.

If the foreign company intends to operate locally (e.g. supply goods in Egypt), it may need to register a branch or secure import/export licenses. But even a simple contract between a foreign and an Egyptian business can be valid: just follow the legalization steps and include an Arabic version . It’s advisable to check whether the transaction falls under any special regulations (such as investment law or commercial agency law) and to involve local counsel if needed.

What Is the Role of Arbitration in Egyptian Commercial Contracts?

Arbitration is widely used in Egyptian business deals as an alternative to court. Many commercial contracts include an arbitration clause – often designating the Cairo Regional Centre for Int’l Commercial Arbitration (CRCICA) – to resolve disputes . This is especially common in international contracts.

Egypt’s Arbitration Act (Law No. 27 of 1994, as amended) provides the legal framework. It requires arbitration agreements to be in writing, and otherwise parties are free to choose the seat, rules, language and arbitrators . Egyptian courts generally support arbitration: in 2022 the Court of Cassation reaffirmed a pro-arbitration policy. As a New York Convention signatory (1959), Egypt enforces foreign arbitral awards almost as if they were domestic judgments . In practice, if parties agree to arbitrate (for example at CRCICA or under ICC rules), Egyptian courts will uphold that agreement and enforce the resulting award unless a strict statutory ground for refusal applies.

For businesses, this means arbitration is a reliable choice. It allows disputes to be handled by international arbitrators and can be faster than Egyptian litigation. Given this pro-arbitration stance and the availability of enforcement mechanisms, including an arbitration clause (often specifying seat in Cairo and CRCICA or ICC rules) is a common way to manage risk in Egyptian commercial contracts .