Iranian contract law is rooted in the Civil Code and respects the principle of freedom of contract, subject to public order and mandatory rules. For foreign parties, the difference between a smooth deal and a costly dispute usually lies in how the contract is drafted.
Formation and validity
A valid contract in Iran requires the parties’ mutual consent, legal capacity, a definite and lawful subject matter, and a lawful cause. Where these elements are present, the agreement binds the parties and the courts will enforce it.
Language and governing law
Many cross-border contracts with an Iranian dimension are signed in two languages. A bilingual English/Persian contract with a clear prevailing-language clause greatly reduces interpretation disputes. Parties should also address governing law and the chosen forum for disputes expressly, rather than leaving them to be implied.
Common pitfalls
- Vague scope, price or delivery terms that invite later disagreement.
- Penalty and liquidated-damages clauses drafted without regard to Iranian rules.
- Dispute-resolution clauses that are unenforceable as written.
- Signatures or authority that cannot later be proven.
Performance and remedies
Where a party fails to perform, the innocent party may seek specific performance, termination and/or damages, depending on the breach and the contract terms. Well-drafted notice, cure and termination provisions make these remedies far easier to apply in practice.
PAD International Group prepares and reviews commercial, agency, distribution, joint-venture and licensing agreements designed to be enforceable under Iranian law.