Within the framework of regulating civil relations and defining the rules governing contracts between individuals and legal entities, the Civil Transactions System adopts one of the most advanced legislative frameworks in the Kingdom of Saudi Arabia. It takes a meticulous approach to regulating contracts and delineating the rights and obligations of the parties involved. The provisions of contracts are considered an essential part of this system.
It is worth noting that this system includes numerous provisions and regulations governing obligations in terms of their sources and consequences, in addition to clarifying the rules related to ownership and the regulations that govern various types of significant contracts associated with most sectors and fields within the Kingdom.
Overview of the Civil Transactions System:
The importance of the Civil Transactions System lies in its role as the general legal framework that regulates all interactions between individuals. This system has brought about a significant and qualitative leap in the legal system of the Kingdom. It has also facilitated judicial processes by encompassing 720 articles that cover all general principles and provisions, including those related to contracts such as the elements of a contract, its effects on the parties, and the rules governing its dissolution, invalidity, compensation, torts, and other provisions detailing and organizing the various types of contractual operations.
This article will delve into the contract provisions within the Civil Transactions System in more detail.
Definition of Contracts and Their Consequences in the Civil Transactions System
The importance of regulating contracts within the Civil Transactions System lies in its role in governing transactions between persons, whether they are natural persons or legal entities. Contracts define the rights and obligations of both parties, enabling them to safeguard these rights and obligations. Based on this premise, a contract is defined as an agreement that arises based on the offer made by one party and the acceptance of the other, whereby both parties commit to fulfilling the obligations agreed upon for the benefit of the other.
As legal instruments, these contracts entail several consequences.
What Are the Consequences of Contracts in the Civil Transactions System?
The Civil Transactions System stipulates that if a contract is valid, it may not be terminated or modified except by a statutory provision or mutual agreement. A contract is considered valid if it meets the essential elements outlined by this system, which include:
– Consent: Article 32 of the Civil Transactions System states that “consent is realized when the wills of two or more contracting parties who possess the capacity to contract coincide, and this will is expressed in a manner that indicates it.” Consent is achieved when the wills of the contracting parties align, provided that both parties have the legal capacity to contract, and the will is expressed in a manner that indicates it. The expression of will can be through words, writing, understood gestures, or conduct, and it can be explicit or implicit.
– Capacity: The system stipulates that every person is deemed to have legal capacity unless their capacity is entirely or partially nullified by law. According to Article 12 of the Civil Transactions System, a person is fully capable if they have reached the age of majority, are of sound mind, and have not been placed under guardianship. The age of majority is defined as 18 lunar years. Article 13 states that a person who lacks capacity is anyone who lacks discernment due to youth or insanity, and a person who has not reached the age of seven is not considered to have discernment. Those with limited capacity include:
– A minor who has reached the age of discernment but not the age of majority.
– An imbecile, which refers to someone with impaired mental faculties but not to the extent of insanity.
– A person placed under guardianship due to prodigality or carelessness.
– Subject Matter: Article 19 states that the subject matter is anything material or immaterial that can be the subject of financial rights, excluding things that by their nature cannot be exclusively possessed or that statutory provisions prevent from being the subject of financial rights. Here, the subject matter of the contract refers to the obligation that one party must fulfill for the benefit of the other. This obligation may be in-kind, performing an act, refraining from an act, or other agreements subject to the will of the contracting parties under the law. According to the Civil Transactions System, wealth is anything with recognized material value, whether in the form of tangible assets, benefits, or rights.
The subject matter must meet the following conditions:
– It must be inherently possible.
– It must not be contrary to public order.
– It must be specified in its essence, type, and quantity or be determinable.
A contract is void if the subject matter does not meet the conditions outlined in paragraph (1) of this article.
– Cause: The cause is the third essential element of a contract. It refers to the legal reason behind the contract’s creation and is considered the driving force behind the will. Without a cause, there is no will, and if the cause is unlawful, the contract is void. Any contract that does not state its cause is presumed to have a lawful cause unless evidence suggests otherwise.
These are the essential elements of a contract, and if any of them are defective or missing, the contractual process is nullified due to a defect in consent.
Before discussing the consequences of contracts in the Civil Transactions System, it is necessary to mention the defects in consent, which can be grounds for contract invalidation. These defects include:
– Mistake: According to Article 57, a contracting party may seek to annul the contract if they made a fundamental mistake that, had they not made it, they would not have consented to the contract, especially if the mistake pertains to the subject matter, the identity of the contracting party, their qualifications, or the statutory provision.
– A mistake is considered significant if the other party knew or should have known about it. A material mistake in calculation or writing does not affect the contract.
– Fraud: Fraud involves one party deceiving the other in a way that leads them to agree to the contract. Concealing something that, if known, would have prevented the contract from being concluded, also constitutes fraud. The defrauded party may request the annulment of the contract, provided the fraud pertains to a material aspect of the contract.
– Duress: Duress involves one party threatening the other in a material or moral way to force them to agree to the contract. Duress is established if the threat involves serious harm to the coerced party’s life, property, or person. The coerced party may seek to annul the contract if the duress was exerted by the other contracting party or by a third party known to the other party.
– Exploitation: If one party exploits the other’s weakness or urgent need to conclude the contract, the court may, at the request of the aggrieved party, either reduce their obligations or increase the obligations of the other party. The court may also annul the contract, provided the lawsuit is filed within 180 days from the date of the contract’s conclusion.
– Excessive Advantage: This refers to an excessive increase or decrease in the agreed-upon compensation beyond what is customary. Excessive advantage is determined according to accepted norms. The system does not grant the aggrieved party the right to annul the contract merely because of excessive advantage, except if the advantage involves the property of a person with limited or no legal capacity. It also excludes contracts concluded through auctions from being challenged merely due to excessive advantage.
Returning to the consequences of contracts in the Civil Transactions System, the rights arising from a contract are vested upon its conclusion. The contract obligates the parties to fulfill the duties specified in the contract. These obligations are not limited to what is explicitly mentioned but also include the obligations specified by the Civil Transactions System, which are determined based on the nature of the contract. As for the contract’s effect on third parties, the contract is not binding on them but may confer a right to a third party.
