The Kingdom's Civil Transactions Law: Financial Aspects of the Post-Legislative Era

The Kingdom's Civil Transactions Law: Financial Aspects of the Post-Legislative Era

We are entering a new era of legislation with its new gateway, the newly passed Civil Transactions Law, when the law in the Kingdom of Saudi Arabia chooses a path that keeps pace with its strategic position. It is compared to civil rationing and is currently regarded as one of the most significant legislations in the Kingdom.

The legislative essence of civil codification (comparison between legal opinions)

If we attempt to define the scope of civil legalization, we discover that all transactions fall under its purview, with the exception of those that fall under a distinct category, such as commercial and administrative activities.

As a result, the Civil Transactions Law is the fundamental piece of normative legislation that will establish the fundamental laws of the Kingdom.

The Kingdom was given the choice between two options in this situation: either the opinion of "Civil Law," which is based on theoretical text, or the opinion of "Complex Law," which is based on judicial application. The Kingdom chose the opinion of "Civil Law," as it is the most widely accepted and best able to resolve the practical inconsistencies of the law.

In complex law, stable applied jurisprudence and some detailed rules are dropped, which may cause ambiguity in the basic legislative environment and may go far in the power of judicial discretion, making it difficult to predict its extent or determine its end. In civil law, ready-made theoretical rules are dropped on practical facts, guaranteeing a margin of expectation of judicial application.

Fundamental Financial Provision in civil law.

According to the following information, the theories of contract and obligation are the most significant fundamental provisions governed by civil law:

·???????Rights: Their nature, establishment, waiver, and expiration; whether they are original rights, like ownership, or subordinate rights, like a mortgage; and whether they are subject to a mortgage.

·???????Contract; in terms of the proposal, acceptance, resolution, outcomes, and obligations.

·???????Civil responsibility: By defining its components in errors, damage, and causality, and by figuring out how responsibility is acknowledged and rejected.

These fundamental legislative laws are actually broad legal principles, and commercial contracts are no exception. These basic legal principles will be followed by specific rules for all contracts and other particular activities.

Legislative Transformation in the Kingdom Civil Transactions Law (Civil Legalization).

The Kingdom is moving towards rationing one step at a time, taking into account all situations, behaviors, and acts that call for legislative involvement. As a result, the Kingdom's regulatory environment transitions into a legislative environment.

As a result, the judge's duty will change, requiring him to first apply the legislative text to the situation that has been brought to him and then, if he is unable to locate a text within the civil transactions legislation, to refer to Islamic law.

Financial examples of civil transactions law in the Kingdom

One of Vision 2030's directives is the building of a legislative framework that is consistent with the Kingdom's strategic development approach.

In this regard, we will present the following practical examples:

An example of monetary compensation

Compensation is a general rule that means avoiding physical harm or financial reimbursement. It may also involve restitution for current losses, potential gains lost, and harm to one's reputation or property.

As a result, a precise and comprehensive legal rule, as stated in the proposed new law on civil transactions, is:

“The official's obligation to compensate for damages is determined by the extent of the loss suffered by the injured party, as well as any lost earnings.”

If a person obstructs another from attending a meeting to finalize an important contract due to a traffic accident, this obstruction not only causes actual damages, such as broken car windows or damaged tires, valued at 1,000 riyals, but also results in a loss of potential earnings for the affected party. For instance, if the contract would have been worth 100,000 riyals and could have been concluded on time, the affected party would have lost the opportunity to earn that amount.

Also, the draft law clearly stipulates the following:

“Compensation for a harmful act includes compensation for moral damage.”

If a person becomes disabled, resulting in the loss of one of their organs or senses due to a workshop's machinery falling on them, the compensation they receive is not limited to the actual damages suffered. The compensation also includes their psychological pain due to the loss of the organ or sense, and the estimation of compensation for this psychological pain is at the discretion of the judge.

Also:

“Compensation is estimated in cash.”

Compensation is not determined by taking any actions, as the compensation system is not designed to restore the situation to what it was before. Instead, it is a system of compensation with a fixed monetary value, which aims to compel the person at fault to pay a monetary amount to the injured party.

Consequently, these texts have elaborated on the details of the rules and provisions with a clear and balanced regulatory stance, and unified the interpretation of the practical cases that apply to them.

An example of an emergency situation:

With the COVID-19 pandemic, it became evident that many civil transactions would encounter difficulties or become impossible to implement.

Numerous sales and lease contracts and other agreements faced conflicts of interest between the parties involved during the COVID-19 pandemic. The contractor who sought to implement the contract argued that the pandemic did not affect the other party's ability to fulfill its obligations, while the obligor contended that executing these obligations was either difficult due to the pandemic's emergency circumstances which were not considered, or impossible altogether.

At this critical juncture, the judiciary was presented with various options for resolving disputes caused by the pandemic. However, there was a concern that judges might handle disputes over the same contracts differently, leading to a fundamental discrepancy. Thus, the issue lay in the judicial application of the jurisprudential legal rules, rather than the rules themselves.

The judiciary in the Kingdom faced a practical challenge, namely the inconsistency and contradiction of rulings based on judges' varying assessments of the pandemic's impact on parties' obligations in civil contracts.

For example, in a lease contract, certain civil professions, such as law, accounting, and consulting, were forced to cease their operations due to quarantine conditions that halted transactions until further notice.

The tenant used to pay rent (for example, 10,000 riyals) without utilizing the leased property, at a time when the pandemic was a completely unforeseeable circumstance for both parties to the lease.

In such a case, it was necessary to intervene either by terminating the contract or by reducing the tenant's obligations until the emergency circumstances ended and their benefit in the property returned to the level it was at the time of contract conclusion.

Consequently, the Supreme Court issued a principle that incorporates applied standards to unify the legal effects of the pandemic on contracts, even before issuing a special transaction law.

After that, a law was issued that adopted force majeure rules, exempting parties from fulfilling a contract if implementation is impossible. In such cases, if the impossibility is total, the contract is terminated. If it is partial, the obligation that has become impossible to fulfill due to emergency circumstances is extinguished.

Example of provisions for substantial financial transactions contracts (known as named contracts):

In civil legislation, the legislator distinguishes between two types of contracts: named contracts, which have their own specific provisions in the civil law due to their importance and widespread use, and unnamed contracts, which are a category of contracts that have arisen without legal specification for their terms and obligations, and instead, it is up to the parties to determine these provisions in accordance with the general rules of commitment without specification.

In the Kingdom, there was no specific system for named contracts that involve transactions with financial or tangible/intangible assets. Consequently, the Civil Transactions Law was issued with a specific section for this category of substantial contracts, which include:

·???????Ownership Contracts: sales and barter (netting contracts), donation contract (without compensation), loan contract, conciliation and competition.

·???????Benefit Contracts: lease, lending, contracting, agency, deposit and custody contracts.

·???????Participation Contracts: corporate contract, speculation and participation in the output.

·???????Guarantee and insurance Contracts.

Example of standard business rules

Commercial law is a part of private law, although it is a unique and specialized area of law that is mainly based on customs that have evolved into binding legal texts. Commercial customs continue to serve as a source of regulation for commercial transactions, but these dealings also require clear and general rules to be referred to when commercial legislation is absent or unclear, or when it is difficult to prove commercial custom.

The Civil Transactions Law has regulated some named contracts that are closely related to the commercial environment, such as corporate contracts, loans, speculation, contracting, agency contracts, and others.

In conclusion, it can be said that the Kingdom is on a path of development, including the economic and financial aspects, and this development is being paralleled by a legal evolution. The Civil Transactions Law represents a significant step in this context.