Contract law in Morocco is primarily governed by the Dahir (Royal Decree) of Obligations and Contracts (DOC) of August 12, 1913. This fundamental text enshrines the principle of freedom of contract, allowing parties to freely determine the content of their agreements, subject to compliance with mandatory rules, particularly those relating to public order and morality. For commercial contracts, particular attention must be paid to certain essential clauses.
Here are some indispensable clauses and points to watch out for:
Penalty Clause (Liquidated Damages)
A penalty clause allows parties to pre-determine the amount of damages payable by a party who fails to perform its contractual obligations (e.g., in case of late delivery, non-payment, etc.). Although the Moroccan Code does not explicitly define the penalty clause as such, its application stems from Article 264 of the DOC (as amended by a 1995 Royal Decree). Thus, a supplier can provide for a fixed penalty in case of a customer's breach. Key Consideration: The judge retains the power to moderate or increase the penalty amount if it is deemed manifestly excessive or derisory. It is therefore advisable to draft a balanced clause.
Retention of Title Clause
Very common in contracts for the sale of movable goods, this clause allows the seller to retain ownership of the goods sold until the buyer has paid the full price. Key Consideration: To be valid and enforceable, especially in the event of insolvency proceedings affecting the buyer, this clause must be stipulated in writing in a clear and precise manner (e.g., in the sales contract, on invoices, or delivery notes). Otherwise, ownership legally transfers upon delivery of the goods, and an unpaid seller will lose their right to reclaim the goods.
Force Majeure or Impossibility of Performance Clause
Although no article of the DOC exhaustively defines force majeure, it is classically understood as any unforeseeable, irresistible event beyond the parties' control that prevents the performance of obligations (e.g., a natural disaster, war, an unforeseen government decision). It is prudent to contractually define what the parties mean by force majeure and its consequences. In a proven case of force majeure, the main obligations are generally suspended without penalty, or the contract may even be terminated.
Arbitration Clause
In the context of commercial relations, including international ones, it is common to insert an arbitration clause. This stipulates that any dispute arising from the contract will be submitted to arbitration (e.g., "any dispute shall be submitted to arbitration by the Casablanca International Mediation and Arbitration Centre - CIMAC - according to its rules"). Arbitration is a private dispute resolution method, recognized and regulated by Moroccan Law No. 08-05, as amended by Law No. 95-17. Key Consideration: In the absence of such a clause, Moroccan state courts, particularly commercial courts, will have jurisdiction to settle disputes. Learn more about this in our guide to commercial dispute resolution in Morocco.
Jurisdiction and Applicable Law Clause
By default, disputes between traders fall under the jurisdiction of the commercial courts of the defendant's registered office or the place of contract performance. For greater legal certainty, parties can include a territorial jurisdiction clause in the contract designating a specific court. Similarly, in an international context, it is useful to specify that Moroccan law is the law applicable to the contract.
Limitation or Exemption of Liability Clause
The DOC generally allows parties to contractually limit their liability for non-performance, except concerning essential obligations of the contract or in cases of gross negligence or willful misconduct. Key Consideration: These clauses must be drafted with great clarity, precisely defining compensation ceilings or cases of exemption, and must not contravene public order.
Condition Precedent or Condition Subsequent Clause
A condition precedent (clause suspensive) makes the formation or performance of the contract dependent on the occurrence of a future, uncertain event (e.g., obtaining a building permit or bank financing). The contract will only take full effect once the condition is met. A condition subsequent (clause résolutoire) provides that the contract will be automatically terminated by operation of law upon the occurrence of a specified event, most often the non-performance by one of the parties of its obligations (e.g., persistent non-payment after a formal notice). Key Consideration: Even if a termination clause is provided, it is often necessary to comply with certain legal formalities (such as a prior formal notice) to officially record the contract's termination.
Other General Points of Vigilance
- Formal Validity: Check if the contract is subject to specific formal requirements. Some contracts, such as the sale of real estate or certain guarantees, require an authentic deed (notarized).
- Identification of Parties: Always provide complete and accurate contact details for the contracting parties.
- Precision of Terms: Clearly define deadlines, payment terms, and the obligations of each party.
- Signature: Ensure that the contract is duly signed by authorized representatives of each party.
- International Contracts: Check for relevant bilateral conventions and be careful when drafting non-compete clauses (their limits must be reasonable in terms of duration, scope, and geographical extent).
- Record Keeping: Keep a dated and signed copy of the contract as legal proof.
For a comprehensive understanding of the essential legal aspects for any investment in Morocco, consult our cornerstone article: Legal Framework for Doing Business in Morocco: An Investor's Guide.