Thursday, March 28, 2024 | Ramadan 17, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Contracts: Protecting your legal rights (Part III)

HASSAN-SHAD
HASSAN-SHAD
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The Oman Civil Transactions Law set out in Royal Decree 27/2013 (the ‘Code’) contains a plethora of rules relating to contracts some of which were discussed in the first two in the series of articles on this subject.


An essential element of contracts is the capacity of contracting parties.


Capacity to contract is the legal competence of a person to enter into a valid contract. Typically, the capacity to contract refers to the ability to enter into a legal agreement and the competence to perform the promised act.


Under the Code, every person is deemed to have the capacity to contract unless that capacity is taken from him/ her or restricted by operation of law.


As a general principle of law, persons who are not of the age of discretion or are insane are not considered to have the capacity to contract.


The Code also provides that a minor who is not of the age of discretion shall not have the right to deal in his property, and all his dealings shall be void.


Moreover, the Code provides that financial dealings of a minor of the age of discretion are valid if they are purely for his own benefit, and void if they are purely to his detriment.


Meanwhile, dealings falling between pure benefit and pure detriment shall depend upon the consent of the guardian within the limits in which it is permissible for the minor to make dispositions either immediately or by ratification by the minor after his attaining the age of maturity.


It is to be noted that dispositions made on behalf of minors by guardians, tutors or protectors are valid within the limits laid down by law.


In other words, natural and legal guardians are empowered to act for and on behalf of minors in legal transactions within the limits prescribed by law.


In addition to the requirement that contracting parties have the capacity to contract, another element required for a valid contract is the absence of duress.


As a general rule, contracts must be entered into freely by the parties leading to the ‘meeting of minds’. At times, however, the meeting of minds may not exist when one or more parties is affected by coercion or force to enter into the contract.


The concept of duress is defined in the Code as coercion of a person, without the right of so doing, to perform an act without such person’s consent.


The forms of duress recognised under the Code are threatening to kill, afflict damage to a body member, affect gross harm or threat of a risk prejudicial to honour or property.


The Code also provides that for there to be duress, the person exercising it must be capable of carrying out his threat, and the victim must believe that the threat will be carried out immediately if he does not do that which he is coerced into doing.


The Code provides that in assessment of duress, the gender, age, social and health status and any other element that could affect the grossness of duress must be considered.


The Code provides that a contract concluded by a coerced shall not be executed except if otherwise permitted by the victim or his heirs after the threat has ceased.


This principle incorporates the concept of ‘voidable’ versus ‘void’ contracts. Void contracts are those that lack enforceability by law (eg where one party is a minor) whereas voidable contracts, allude to a contract wherein one party has the right to enforce or rescind the contract, ie the party has the right to put the contract to end.


In the context of a contract concluded by a coerced, the contract is therefore not void, but voidable, because the coerced has the right to execute the contract.


The Code also covers the circumstances when a contract is the result of one party exercising deception or cheating against the other.


The Code provides that deception is when one of the two contracting parties deceives the other by means of trickery of word or deed, which leads the other to consent to what he would not otherwise have consented to.


It is to be noted that under the Code, deliberate silence concerning a fact or set of circumstances shall be deemed to be a deception if it is proved that the person misled thereby would not have made the contract had he been aware of that fact or of circumstances.


The Code further provides that deception makes the contract ineffective and allows the deceived the right to annul it.


The next article will cover two important concepts: ‘cheating’ and ‘mistake’, both of which materially affect the validity and legality of contracts as they are fundamental to what one or both parties were contracting for.


HASSAN SHAD


hassan.shad@arab-law.om


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