Barter contract and guaranteeing the rights of the exchange parties
Contracts are considered one of the most important transactions between individuals in society. This is because these contracts contribute to regulating the relationship between them and establishing transactions in a systematic manner that guarantees the rights of all parties to the contract.
In this regard, the Civil Transactions Law addresses contract issues, particularly sales and barter contracts, which are among the most common contracts people deal with in their daily lives, in terms of the type of contract, its terms, and the obligations of the parties involved.
What are barter contracts?
Article 361 of the Civil Transactions Law defines a barter contract as a contract for exchanging money for money by way of ownership, neither of which is cash.
A barter contract is one of the oldest and most well-known methods of sale. It is an agreement between the two parties to a contract to exchange two goods or services without using money as a means of purchase.
For example, a farmer exchanges a farm crop for a number of livestock.
What are the terms of sale by barter?
The barter contract requires specific conditions for the validity of the contract:
Contract type
The two parties must agree on the wording of the swap contract to distinguish it from other contracts and formulate the terms of the contract accordingly.
Contractor satisfaction
Satisfaction is considered one of the basic pillars of the contract, as the seller and buyer must offer and accept to accept this contract and agree to it frankly.
The parties to the contract must agree in the swap contract on the type of goods, the terms and their respective obligations in the contract.
Al-Ahlia
It is required that all contracting parties be fully qualified when concluding the contract. It is not valid to contract with someone who is deficient or incompetent without the guardian’s approval.
The subject of the contract must be legitimate and specific
The subject of the contract shall be legitimate and specific
The item must be specific and clear, so it is not permissible to sell something unknown.
The commodity to be sold through barter must also not violate the provisions of Islamic Sharia and local regulations in force in Saudi Arabia. For example, drugs may not be exchanged for a car or a valuable watch.
Price or consideration
In a barter contract, the two parties must agree to exchange goods between them and determine their value by mutual consent.
Article 363 of the Civil Transactions Law allows for the addition of a financial amount to cover the difference in value if the value of one good or service is less than the value of another.
Payment of swap contract expenses
Article 364 of the system stipulates that the parties shall bear the expenses of the barter contract equally between them unless they agree otherwise.
What is the difference between a sales contract and a barter contract?
What is the difference between a sales contract and a barter contract?
Determine the financial compensation
In the sales contract, the buyer is obligated to pay the agreed-upon value of the item in cash, and the value of the item sold must be agreed upon between the seller and the buyer.
In a barter contract, goods or services are exchanged between the parties instead of money, and the type of good is determined and its value is evaluated by mutual consent between them, regardless of its real price.
Status of contract parties
In a sales contract, the contract is concluded between the seller who owns the commodity and the buyer who wishes to purchase and acquire it in exchange for money.
While the Civil Transactions Law stipulates in Article 362 that each party to the barter contract is considered a seller of what was bartered and a buyer of what was bartered, this means that each contractor is considered a seller and a buyer at the same time.
What is the difference between bargaining and bartering?
The difference between bargaining and barter is that bargaining is a negotiation between the buyer and seller to reduce the value of the commodity and discuss its specifications, which may lead to the completion or cancellation of the deal.
Unlike barter, which requires both parties to be satisfied with the contract and agree on the goods and services to be exchanged between them.
What are the disadvantages of barter?
Although the barter contract is characterized by simplicity and flexibility in exchanging goods, this contract has fundamental disadvantages, including:
- Difficulty in clearly determining the value of exchanged goods as this is due to the agreement of both parties.
- Inability to make deferred payments.
- People prefer cash payments rather than exchanges because they are less transactional.
It is important to consult a lawyer from the office of Lawyer Abdul Majeed Al Rashid who specializes in contracts to review them and verify obligations and rights before signing them to avoid legal risks.
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