The Ministry of Justice has clarified the key features of the Saudi Civil Transactions Law following its approval by the Council of Ministers after completing all necessary procedural reviews in the Shura Council. This law is one of four systems announced by His Royal Highness Prince Mohammed bin Salman and ranks third among the judicial systems aimed at implementing Saudi Vision 2030. The Civil Transactions Law plays a crucial role in predicting and stabilizing judicial rulings, ensuring consistency.
Civil Transactions Law
The primary goal of the Saudi Civil Transactions Law is to regulate and organize the relationship between individuals and assets, whether through direct acquisition (real rights) or indirect acquisition (personal rights).
This law is a cornerstone of legislative efforts in the Kingdom and addresses numerous societal challenges, particularly those related to civil disputes and issues arising from contractual relationships.
One of the standout features of this law is its inclusion of general rules applicable throughout the Kingdom, ensuring they do not conflict with existing legal provisions while considering the nature, conditions, and exceptions of each rule.
Objectives of the Civil Transactions Law
- Protecting individuals’ financial rights.
- Increasing stability in financial transactions and civil contracts.
- Providing an attractive investment environment.
- Preserving market rules.
- Enhancing trust in the business sector.
- Regulating both financial and personal relationships.
- Structuring relationships between contracting parties.
- Accommodating all contracts and transactions conducted in the Kingdom.
Key Features of the Civil Transactions Law
The law comprises 721 articles, with significant highlights including:
- Article 2: Stipulates that periods and deadlines mentioned in the law are calculated according to the Hijri calendar. Implementation of the law’s provisions does not conflict with specific legal texts.
- Article 3: States that a person’s legal status begins upon birth and ends upon death, with rights of unborn children governed by legal provisions.
- Article 4: Clarifies that provisions for missing persons, the absent, and those of unknown lineage apply to these categories.
- Article 5: Applies legal provisions to individuals’ names, titles, families, relatives, and nationalities.
- Article 6: Defines direct kinship as the relationship between ascendants and descendants, while indirect kinship refers to connections through a common ancestor without one being a descendant of the other.
Commitments Under the Law
A critical aspect of the law is the emphasis on obligations, which foster an attractive investment environment. Among the most vital obligations are contracts, as outlined in Article 31, which highlights the necessity of linking an offer to acceptance to create legal effects. The article also elaborates on the elements of contracts, their consequences, types, termination conditions, and annulment scenarios.
Other sources of obligations include acts of free will. According to Article 115, individuals may create obligations through unilateral will under the circumstances defined by legal texts.
The law also addresses damages that result in the loss of obligations. Article 120 specifies that any error causing harm to others mandates compensation by the party at fault. It further clarifies damages to individuals or property, detailing the rules for determining compensation owed to the injured party.
Article 144 mandates that any individual who unjustly enriches themselves at another’s expense must compensate the affected person for their losses, limited to the amount of enrichment. The obligation remains even if the enrichment is later removed.
Finally, Article 166 states that obligations arising solely under the Civil Transactions Law are governed by its legal provisions.
Key Features of the Civil Transactions Law Regarding Nominate Contracts
The Saudi Civil Transactions Law places significant emphasis on nominate contracts, which include provisions for contracts related to ownership. Below are the most notable types of contracts and their related provisions:
Contracts Related to Ownership
- Sale Contract:
- Defined in Article 307, which specifies that a seller has the right to sell an item to a buyer in exchange for a monetary price.
- Barter Contract:
- As per Article 361, it allows the exchange of one asset for another, provided neither is currency, thus granting ownership through exchange.
- Gift Contract:
- Under Article 366, a donor (grantor) can transfer property to a recipient during their lifetime without receiving anything in return.
- Loan Contract:
- Outlined in Article 382, this involves the lender transferring ownership of a fungible item to the borrower, who must return an equivalent item.
- Settlement Contract:
- According to Article 391, two parties engaged in a current or potential dispute may resolve their differences by mutual agreement. This can involve both parties waiving claims, or one party waiving claims without reciprocation from the other.
Contracts Related to Utility
The law also regulates contracts for deriving utility:
- Lease Contract (Article 407):
- Enables the lessee to use a non-consumable item for a specified period in exchange for rent paid to the lessor.
- Loan for Use (Article 451):
- Allows the borrower to use an item loaned by the lender for a set period without compensation, provided the item is non-consumable and is returned to the lender.
Contracts Related to Work
The law includes provisions for work-related contracts, such as agency contracts, construction contracts, deposit contracts, and guardianship contracts.
Other Notable Contracts
- Partnership Contracts:
- Includes provisions for corporate contracts and profit-sharing agreements, such as the mudaraba contract (profit-sharing).
- Surety Contracts:
- Detailed regulations governing suretyship agreements are also included.
Property Rights and Related Provisions
Another significant aspect of the Civil Transactions Law pertains to property rights. The law provides comprehensive provisions on:
- Shared Ownership Division:
- Clarifies rules for dividing jointly owned properties.
- Ownership Restrictions:
- Defines limitations and conditions that may apply to property ownership.
- Acquisition of Ownership:
- Details the mechanisms and conditions for acquiring property within Saudi Arabia.
- Usufruct Rights:
- Specifies rules for enjoying the benefits of property owned by another party.
- Easement Rights:
- Clarifies types, provisions, and uses of easement rights within the Kingdom.
