Feasibility of Adjusting Contractual Penalty Clauses, Particularly in Construction Partnership Contracts

Abstract

This study aims to examine the feasibility of adjustment in construction partnership contracts and analyze the legal barriers and challenges associated with it. The primary focus is on the legal principles governing contracts within the Iranian legal system, its comparison with other legal systems, and offering solutions for improving the laws and regulations in this area. The feasibility of adjusting contractual penalty clauses, particularly in construction partnership contracts, is a significant issue in Iranian law. This article investigates the impact of changes in economic, social, and natural conditions on the possibility of adjusting penalty clauses in such contracts. With reference to Articles 10 and 975 of the Iranian Civil Code, and the role of social customs and public order, analyses are provided that can contribute to balance and justice in contractual relations. Moreover, suggestions are offered for reforming pre-sale building laws and establishing specific conditions for the adjustment of penalty clauses. The research is descriptive-analytical in nature and has been conducted through the analysis of legal documents, judicial cases, and comparative studies. Research data were collected from construction partnership contracts concluded in the metropolitan cities of Tehran, Isfahan, and Mashhad between 2011 and 2024. In addition, interviews were conducted with legal experts and professionals in the construction industry. Findings show that legal principles such as freedom of contract, contractual justice, and force majeure provide a framework for contract adjustment. However, the lack of specific standards in Iranian law and inconsistencies in judicial practice are major obstacles to contract adjustment. To improve the process of contract adjustment in Iran, it is necessary to develop clear regulations and incorporate explicit clauses into construction partnership contracts. These measures can help reduce legal disputes and strengthen trust between contracting parties.