Article 111 of the Saudi Civil Transactions Law
المادة 111 من نظام المعاملات المدنية · الفرع السادس: فسخ العقد وانفساخه أولًا: الإقالة
The article provides that termination or automatic termination returns the parties to their position before contracting, with compensation where this is impossible, and has no retroactive effect in time-based contracts.
Official text (Arabic)
This article has not been amended since the law was issued.
1- في حالتي فسخ العقد أو انفساخه يعود المتعاقدان إلى الحالة التي كانا عليها قبل التعاقد، وإذا استحال ذلك فللمحكمة أن تقضي بالتعويض.
2- إذا كان العقد من العقود الزمنية فلا يكون للفسخ أو الانفساخ أثرٌ رجعيٌّ، وللمحكمة أن تقضي بالتعويض إن وجد له مقتضٍ.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 111 explained in plain English
This article explains what follows when a contract ends by termination (at a party's request) or by automatic termination (of its own accord), and distinguishes between two types of contract:
Paragraph 1 — the general rule: restoring the position. In cases of termination or automatic termination, the contracting parties return to the position they were in before contracting. Each party returns what it took under the contract. If that is impossible, the court may award compensation.
Paragraph 2 — time-based contracts: no retroactive effect. If the contract is a time-based contract, meaning one in which time is an essential element of performance, such as a lease, then termination or automatic termination has no retroactive effect. What was performed under the contract in the past period remains as it is, and the contract ends for the future. The court may award compensation if warranted.
The reason for this distinction is that a benefit a party has already enjoyed in a time-based contract during the past period cannot by its nature be returned.
The article is linked to Article 110, which provides for automatic termination of the contract when performance is impossible for a reason beyond the debtor's control, and to Article 112, which protects the contracting party's specific successor who acquired a real right in good faith, so that termination cannot be asserted against him.
The text does not specify how compensation is assessed; that is left to the court. In a dispute over what must be returned after termination, consider consulting a lawyer who specializes in civil or commercial cases.
Practical example
A contract for the sale of a car between Badr and a showroom in Riyadh was terminated, so the parties return to their prior position: Badr returns the car and recovers the price. But if an apartment lease was terminated six months after it began, the termination has no retroactive effect on the past months in which the tenant used the apartment, and the court may award compensation if warranted.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 111 of the Saudi Civil Transactions Law
What happens after a contract is terminated?
The contracting parties return to the position they were in before contracting, and if that is impossible, the court may award compensation.
Does a tenant get back past rent if a lease is terminated?
A lease is a time-based contract, termination of which has no retroactive effect, and the court may award compensation if warranted.
What is meant by termination having no retroactive effect?
That in time-based contracts, termination does not return the parties to their position before contracting for the past period.
More articles on Voidness and Termination of Contracts
- Article 49
The transactions of a minor unable to discern are void.
تصرفات الصغير غير المميز باطلة.
- Article 50
The purely beneficial transactions of a minor able to discern are valid and the purely harmful ones void; those between benefit and harm are valid, and his guardian, executor or he after majority may seek to annul them.
1- إذا كانت تصرفات الصغير المميز نافعةً نفعًا محضًا فهي صحيحة، وإذا كانت ضارةً ضررًا محضًا فهي باطلة. 2- إذا كانت تصرفات الصغير المميز دائرةً بين النفع والضرر ف
- Article 53
The transactions of a spendthrift and of a person of impaired judgment after interdiction are treated like those of a minor able to discern; before interdiction they are valid unless they resulted from exploitation or collusion.
تصرفات السفيه وذي الغفلة بعد الحجر عليهما في حكم تصرفات الصغير المميز، أما تصرفاتهما قبل الحجر فصحيحةٌ إلا إذا كانت نتيجة استغلالٍ أو تواطؤٍ.
- Article 56
If a partially incapacitated person resorts to fraudulent means to conceal his incapacity, he must compensate the other contracting party for the harm caused by the annulment of the contract.
إذا لجأ ناقص الأهلية إلى طرقٍ احتياليَّةٍ لإخفاء نقص أهليته لزمه التعويض عن الضرر الذي أصاب المتعاقد معه بسبب إبطال العقد.
- Article 57
A contracting party may seek annulment of the contract if he made a material mistake without which he would not have agreed to the contract, particularly a mistake in a quality of the subject matter, in the other party's person or quality, or in a statutory ruling.
للمتعاقد طلب إبطال العقد إذا وقع في غلط جوهري لولاه لم يرض بالعقد، وبخاصة إذا كان الغلط الجوهري في صفة المحل أو شخص المتعاقد معه أو صفته أو الحكم النظامي.
- Article 58
A contracting party's mistake is taken into account only if the other party made the same mistake, knew he had made it, or could easily have discovered it.
لا يُعتد بغلط المتعاقد إلا إذا كان المتعاقد الآخر قد وقع معه في الغلط نفسه أو علم بوقوعه فيه أو كان من السهل عليه أن يتبينه
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.