Provisions of the moot contract in the civil transactions system
The contract is considered a means of commitment, as the two parties agree to implement it according to the agreed-upon terms and conditions in a way that achieves their interests and proves their rights.
The sham contract is one of the contracts stipulated in the Civil Transactions Law, which regulates its provisions and controls in a manner that does not violate Islamic Sharia and the regulations in force in Saudi Arabia.
What is a sham contract?
A formal contract is defined in the Saudi system as two contracts, one of which is apparent and the other is hidden. The hidden contract is the intended contract and is the contract upon which the will of both parties is concluded. The apparent contract is a formal contract in front of others for different purposes and objectives.
The purpose of concluding a sham contract is to achieve personal interests or benefits for both or one of the contracting parties.
These goals may be legitimate, such as a husband giving his wife, or illegitimate, such as evading debts or taxes, or the purpose may be to hide money, avoid government fees, and other goals.
What are the terms of the moot contract?
- The existence of two contracts: an apparent contract, which is a formal contract, and a hidden contract.
- That the contracting parties intend to hide the truth of the contract.
- The apparent formal contract between the contracting parties must be the contract announced to third parties.
- That the two contracts be concluded simultaneously.
What is the difference between a formal contract and a hidden contract?
A sham contract is a contract that is apparent and announced to third parties where creditors or others believe that the two parties have agreed to conclude a sales contract between them.
A hidden contract is a contract to which the will of the contracting parties has been directed and which they have agreed to implement on the condition that it is hidden from everyone. For example, if they agree that the contract between them is a loan contract and that the contract that is apparent or announced to everyone is a sale contract.
What are the types of moot contracts?
absolute formalism
It is one in which there is only one fictitious contract but it is not implemented, such as if the debtor decides to evade implementation on his money, so he concludes a fictitious contract proving that ownership of his property has been transferred to his children or wife, and he originally still owns and manages it himself.
Relative formality
It is a contract in which there is an apparent contract and a hidden contract such that the two parties agree that the purpose behind the hidden contract is to conceal the legal disposition, such as their agreement that the apparent contract is a sale and the hidden contract is a gift for the purpose of avoiding the fees for transferring ownership of the vehicle when transferring ownership from one person to another.
The difference between absolute and relative formality lies in the fact that in absolute formality the disposition is not carried out in the first place, but in relative formality the contract is carried out, but by concealing the legal disposition from others.
When is a sales contract a formality?
The sales contract is merely a fictitious contract if both parties are contracted. The apparent contract is a sales contract and the hidden contract is a gift contract. The price in the sales contract is small and does not match the value of the sale, such as selling a car for 200 Saudi riyals, when its real value exceeds 80,000 Saudi riyals.
“In cases related to contracts and civil transactions, the Public Prosecutor plays a pivotal role in analyzing the facts, uncovering legal risks, and providing sound systemic solutions.
What is the ruling on a sham contract?
In the civil transactions system, a sham contract is permissible if the intent of the contract is legitimate and does not violate the provisions of Islamic Sharia and current regulations, without harming the interests of others.
The system addressed the issue of the validity of the apparent contract and the hidden contract in Article 190, where the article stipulated that the contract in force between the two parties is the hidden contract in implementation of the principle of the authority of will, because the two parties agreed to establish it.
As for confronting third parties, the apparent contract is the one in force between the contracting parties and the third parties, but the system in Article 189 allows the contracting creditors to adhere to the apparent (formal) or hidden contract according to their interests, and in the event that the interests of the creditors conflict and they do not agree, the effective contract is the apparent contract.
Provisions of the moot contract in the civil transactions system
How is a fictitious contract proven?
A fictitious contract can be proven by all means of proof, as the civil transactions system allows the contracting party harmed by the contract to prove the hidden contract and hold on to it against the other contracting party.
Creditors can adhere to the formal contract announced to them and prove the bad faith of one of the contracting parties, such as the heirs proving that the sales contract is a formal contract, as their heir concluded a will in the form of a sales contract to one of the heirs with the intention of depriving the rest of the heirs of the inheritance.
Provisions of the moot contract in the civil transactions system and the protection of dealers
Protecting your rights begins with proper and timely legal advice.
With the office of Attorney Abdul Majeed Al Rashid, you can obtain the services of a public defender, including legal consultations, drafting and reviewing contracts, regular follow-up, attending sessions before the competent courts, and providing an approved legal opinion with ease and safety.
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