Recovering the deposit in Saudi law
The Kingdom of Saudi Arabia has been keen to regulate the contractual relationship between the parties to the contract, clarify the types of contracts, their terms, and the court competent to review them by developing local regulations and legislation.
The deposit is considered one of the most famous means of preserving the rights of the parties to the contract, according to the Civil Transactions Law, which regulates the terms of the deposit, its duration, and the cases of its recovery.
What is a deposit in Saudi law?
A deposit is a sum of money paid by a buyer to a seller as part of the agreed price when purchasing a commodity or property as a guarantee that the buyer is serious about completing the contract.
The importance of the deposit in the sales contract lies in the fact that it preserves the rights of both parties, enhances credibility, and ensures compliance with contracts.
For example, in a sales contract, the buyer offers the seller a deposit of 20,000 Saudi riyals to purchase a car worth 70,000 Saudi riyals.
Recovering the deposit in Saudi law
Is the deposit refunded in the Saudi system?
Yes, the deposit amount can be refunded according to specific rules and conditions stipulated in Article 44 of the Saudi Civil Transactions Law.
Conditions for returning the deposit:
- In the event that the seller withdraws from completing the contract: The buyer has the right to recover the deposit amount if the seller decides to withdraw from completing the contract or deal.
- In the event that the buyer withdraws from completing the contract: The seller has the right to keep the deposit amount if the buyer is the reason for not completing the contract or deal.
What is the difference between a deposit and a penalty clause?
What is the difference between a deposit and a penalty clause?
A deposit differs from a penalty clause in that:
Due time
The deposit is due in advance when concluding the contract to ensure the completion of the contract, and the buyer has the right to withdraw from completing the contract without incurring any obligations.
The penalty clause is due when one of the parties fails to fulfill its contractual obligations.
In terms of goal
The purpose of the deposit is to ensure the buyer’s commitment to completing the transaction or contract.
While the penalty clause aims to compensate the injured party by adding it as a binding clause in the contract to determine the value of the compensation amount when one of the parties breaches his obligations in the contract.
Recovering the deposit in Saudi law
What is the difference between a deposit and a down payment?
The difference between a deposit and a down payment is that the deposit payer has the right not to complete the transaction and the deposit amount can be refunded by the injured party, whether it is the seller or the buyer.
While the provider is a main condition for completing the deal because it is part of the deal amount, failure to implement the contract results in the forfeiture of the right to recover it because the contract here is obligated to reverse the deposit.
Is the broker entitled to take the deposit?
The deposit is a tool to ensure the implementation of obligations between the two parties to the contract, so the broker does not have the right to keep the deposit amount to ensure that he receives his commission from the real estate deal.
How do you determine the deposit value?
How do you determine the deposit value?
The deposit in the sales contract
The Saudi civil transactions system left the freedom to determine the value of the deposit in the sales contract by agreement between the parties when concluding the contract.
Pledge system in real estate
The value of the real estate transaction deposit is determined by agreement between the parties, provided that it does not exceed 5% of the transaction value, in accordance with Article 13 of the Real Estate Brokerage Law.
The contract must state in writing that the amount paid by the buyer to the seller is a deposit to complete the real estate transaction. Otherwise, the amount paid in advance for the transaction value will be deemed not to be due to the seller or lessor in the event of termination of the contract.
How long is the deposit?
The parties to the contractual relationship must determine the term of the deposit. If this term expires and the buyer does not accept or reject it or does not fulfill his obligations, this silence is considered a reversal of the contract and he must fulfill his obligations or compensate the seller for the breach of the contract.
The Saudi Civil Transactions Law stipulates that the court may determine the duration of the deposit according to custom and the circumstances of the contract in the event that the parties do not agree on this.
Recovering the deposit in Saudi law
A lawyer specializing in commercial cases from the office of Attorney Abdul Majeed Al Rashid, he provides a variety of legal services, including case study and analysis, drafting and reviewing commercial contract terms, representing clients before government agencies, attending sessions before commercial courts, and pleading on behalf of clients, among other services.
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