Every time you buy a car, sign a lease, agree with a contractor, borrow money, or even promise someone something of value — you are entering into a "civil transaction." Until the Civil Transactions Law was issued, these dealings were not governed by a comprehensive written law, but rather by judicial discretion grounded in jurisprudence. The new law, issued by Royal Decree No. (M/191), changed this picture fundamentally: for the first time, we have a written civil law of more than 720 articles regulating contracts, obligations, liability, and ownership. Here is an overview of what it means for you, whether you are an individual or a business owner.
Why is this law different?
The law's importance comes not only from being new, but from the breadth of its scope. It governs nearly every financial dealing between two persons, and sets clear rules that were previously a matter of discretion that could differ from one judge to another. This means a far greater degree of predictability — you can know in advance, to a large extent, how your contract or dispute will be viewed.
Where does it apply, and where doesn't it?
The law applies its provisions to matters it addresses expressly or implicitly. If there is no applicable text, reference is made to the general principles at the end of the law, then to the provisions derived from Islamic Sharia most suited to it. But note: the law does not prejudice special laws. If a special law regulates a particular matter (such as the Labor Law, the Companies Law, or insurance regulations), the special provision is what applies.
An important note for merchants: the law applies to commercial transactions as well, but insofar as it does not contradict the nature of the commercial transaction, and only where no special provision exists in the commercial laws.
A subtle point: the law applies to prior events
One of the points that most surprises people is that the law applies to events that occurred before it came into force, not only to what happens afterward. This means a contract you concluded years ago may have the new law's provisions applied to it in a dispute.
But there are two important exceptions: first, if there is a prior statutory text or judicial principle that contradicts the law and a party invokes it. Second, if the matter concerns a prescription period (a time bar preventing a case from being heard) that began before the law came into force.
Why does this matter to you?
Do not assume your old contracts are "outside the scope" of the new law. If you have a long-term contract or a potential dispute over a prior transaction, it is worth reviewing it in light of the new provisions.
What does the law cover? A quick map
The law is divided into three main sections, and it helps to know what falls under each:
Section One — Obligations (Personal Rights): the heart of the law. It covers the sources of obligation (contract, unilateral act, harmful act, unjust enrichment), the effects of obligations and their performance, and their extinction (payment, set-off, release, prescription).
Section Two — Nominate Contracts: the detailed provisions for each individual contract: sale, barter, gift, loan, settlement, lease, lending for use, muqawala (works contracts), agency, deposit, suretyship, partnership, mudaraba, and others.
Section Three — Real Rights: the right of ownership and its derivatives (usufruct, use, habitation, easement), co-ownership and its partition, pre-emption, and possession.
General principles governing all your dealings
Before getting into details, the law establishes overarching principles worth knowing:
First, good faith is a fundamental pillar. A contract must be performed in a manner consistent with what good faith requires, and a contract is not limited to its literal text but includes what its requisites entail according to custom and the nature of the contract.
Second, the prohibition of abuse of rights. Even if you have a right, you may not exercise it intending to harm others, or where the benefit you gain is entirely disproportionate to the harm it causes.
Third, the contract is the law of the parties, but with safeguards: the law allows a court, in exceptional general circumstances that could not have been foreseen, to restore balance to an onerous obligation — what is known as the theory of unforeseen circumstances.
The general principles: condensed wisdom at the end of the law
One of the most elegant features of the law is that it concludes with 41 general principles derived from jurisprudence, applied where no text exists. Among them are principles you will hear often, such as "matters are judged by their objectives," "in contracts, weight is given to intentions and meanings rather than words and forms," "certainty is not removed by doubt," "harm shall be removed," and "custom is authoritative." These are not mere rhetorical phrases — they are genuine interpretive tools the courts rely on.
When did it come into force?
The law provided for its application 180 days after its publication in the Official Gazette, and repealed everything inconsistent with it. This means the law is now in force and effectively governs your dealings.
Conclusion
The Civil Transactions Law is not a law "for lawyers only" — it is the law governing the contract you sign tomorrow, the obligation you enter into, and the property you buy. Your understanding of the big picture makes you a more aware party in any dealing. The golden rule: before any dealing of value, ask yourself three questions — what are my rights? what are my obligations? and what happens if the other party breaches? The law answers all three.
In upcoming posts, we will detail the law's most important chapters: prescription and the lapse of rights, contract rules and defects of consent, liability and compensation, and breach and termination of contract.
How does LEXIUM help?
We review your contracts and dealings in light of the Civil Transactions Law, clarify your rights, obligations, and points of risk before they turn into a dispute — whether you are an individual or a company.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. See our full disclaimer.