Friday, March 29, 2024 | Ramadan 18, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

A contract must be inherently possible and deliverable

HASSAN-SHAD
HASSAN-SHAD
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The Oman Civil Transactions Law set out in Royal Decree 27/ 2013 (the Code) contains detailed rules relating to all aspects of contracts some of which have been discussed in the previous articles on the subject.


The Code also reflects certain fundamental requirements of contract formation that exist in other countries. One of these is the requirement that a contract must have a subject-matter to which it relates. Generally, the subject-matter is the object or thing under a contract. The Code states that subject-matter of a contract must be “inherently possible and deliverable”. This requirement under the Code rules out any subject-matter of a contract which, by its very nature, is impossible to be delivered or performed by either contracting party.


The Code also provides that the subject-matter of a contract cannot be a thing that is prohibited to be dealt under the Islamic Sharia.


Islamic Sharia refers to canonical Islamic law based on the Quran and the Ahadith and Sunnah i.e. traditions of the Prophet Muhammad (Peace Be Upon Him). Generally, with the exception of personal laws and family laws that relate only to Muslims, it is to be noted that Omani laws relating to commercial, civil and contractual matters are not based solely on rules of Islamic Sharia.


As a general rule, the Code provides that contracts whose subject-matter is unlawful under the Sharia are void i.e. they are invalid and without any legal effect.


The above provision under the Code is in line with the Oman Basic Law set out in Royal Decree 101/96 (Basic Law) which sets out the constitutional framework of Oman. Article 2 of the Basic Law provides that the religion of the state is Islam and Islamic Sharia is the basis for legislation.


The Code also incorporates another fundamental rule of contracts i.e. that for a contract to be valid, it must contain a lawful benefit for both parties. This rule is logical because the purpose of parties’ entering into a contract would stand defeated if either or both parties did not derive a lawful benefit from the contract.


As to what constitutes a valid contract has also been defined in the Code. A valid contract is one which is (i) lawful in its essence and description, (ii) made by a competent person in respect of a subject matter that properly falls within the ambit of the contract, (iii) meets with the requirements for its validity as provided for in law, and (iv) is not accompanied by any vitiating condition i.e. a condition that impairs the quality or effectiveness of the contract.


The Code defines a null contract one which is unlawful in its essence and form, which lacks the elements of a contract, or which is defective in its subject matter or purpose or form as laid down under law. Under the Code, a null contract is without any legal effect and any person having an interest therein may seek to have such contract rendered null and void by Court.


With reference to null contracts, the Code further provides that if part of a contract is void, the entire contract shall be void unless the subject matter of each part is specified, in which case it will be void as to the void part, and the remainder will be valid. In relation to the aforesaid, it to be noted that it is quite common for contracting parties to agree to a “severability clause” in a contract which provides that if a part the contract is held to be illegal or unenforceable, the remainder of the contract would still apply and be deemed to be valid and in force. The purpose of the severability clause is to show the contractual intent of the parties to delete enforceable, illegal or void/invalid contractual provisions and at the same time save the remainder of the contract.


Furthermore, the Code also refers to voidable contracts i.e. contracts that are not null and void ab initio i.e. from the outset, but contain some defects or shortcoming which, if cured or removed, would make such contracts valid. The Code defines a voidable contract as one which is lawful in its essence but not in form and once the cause of the defect is removed, such contract is valid. However, it is to be noted that in the case of voidable contracts, each of the parties to the contract and their heirs have the right to cancel the voidable contract after giving notice to the other contracting parties. Thus, under the Code the contracting parties retain the right to terminate the contractual relationship under voidable contracts instead of choosing to cure or rectify the defect and transform the voidable contract into a valid contract.


HASSAN SHAD


hassan.shad@arab-law.om


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