Article 179 of the Saudi Civil Transactions Law
المادة 179 من نظام المعاملات المدنية · الفصل الثاني: التنفيذ بطريق التعويض
The article sets controls on agreed compensation: it is not due if no harm occurred, the court may reduce or increase it on conditions, and any contrary agreement is void.
Official text (Arabic)
This article has not been amended since the law was issued.
1- لا يكون التعويض الاتفاقيُّ مستحَقًّا إذا أثبت المدين أن الدائن لم يلحقه أي ضرر.
2- للمحكمة بناءً على طلب المدين أن تنقص هذا التعويض إذا أثبت أن التعويض المتفق عليه كان مبالغًا فيه أو أن الالتزام الأصلي قد نُفذ جزء منه.
3- للمحكمة بناءً على طلب الدائن أن تزيد هذا التعويض إلى ما يساوي الضرر إذا أثبت أن الضرر جاوز مقدار التعويض الاتفاقي نتيجة غش أو خطأٍ جسيمٍ من المدين.
4- يقع باطلًا كلُّ اتفاقٍ يُخالف أحكام هذه المادة.
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 179 explained in plain English
Article 178 allows the contracting parties to fix compensation in advance. Article 179 adds four controls that protect both parties from this compensation becoming unfair:
- Absence of harm: Agreed compensation is not due if the debtor proves that the creditor suffered no harm. Agreed compensation is tied to the existence of harm, and the burden of proving its absence is on the debtor.
- Reduction: The court, at the debtor's request, may reduce the compensation if he proves one of two things: that the agreed compensation was excessive, or that part of the original obligation has been performed.
- Increase: The court, at the creditor's request, may increase the compensation to equal the harm if he proves that the harm exceeded the agreed compensation as a result of fraud or gross fault by the debtor. It is not enough for the harm to exceed it; it must be the result of fraud or gross fault.
- Nullity: Any agreement contrary to the provisions of this article is void. For example, one may not agree in advance to prevent the court from reducing or increasing the compensation in the cases mentioned.
Note that reduction and increase are made at the request of the interested party and with proof of the conditions in the text. Article 180 regulates the assessment of compensation when it is not fixed in the contract or by a statutory provision. To assess your position on a penalty clause in a contract, you may consult a lawyer specializing in civil and compensation cases or in commercial cases.
Practical example
A contract between a shop owner in Riyadh and a decorator provided for agreed compensation of SAR 50,000 if delivery was late, and the decorator was then a few days late after completing most of the work. The decorator may ask the court to reduce the compensation if he proves that it is excessive or that part of the obligation has been performed, and if he proves that the shop owner suffered no harm, the compensation is not due.
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 179 of the Saudi Civil Transactions Law
Do I pay the penalty clause if the other party suffered no harm?
Agreed compensation is not due if the debtor proves that the creditor suffered no harm.
Can a penalty clause be reduced?
Yes. At the debtor's request, the court may reduce it if he proves that it is excessive or that part of the original obligation has been performed.
When does the court increase the agreed compensation?
At the creditor's request, if he proves that the harm exceeded the agreed compensation as a result of fraud or gross fault by the debtor.
Is an agreement not to modify the penalty clause valid?
Any agreement contrary to the provisions of Article 179 is void.
More articles on Performance of Obligations and Agreed Compensation
- Article 107
The article lets a party to a bilateral contract, after warning the defaulting party, demand performance or termination, with compensation if warranted, in either case.
في العقود الملزمة للجانبين، إذا لم يوف أحد المتعاقدين بالتزامه، فللمتعاقد الآخر بعد إعذاره المتعاقد المخل أن يطلب تنفيذ العقد أو فسخه، مع التعويض في الحالتين إن
- Article 161
The article requires the debtor to perform his obligation when it falls due and allows it to be enforced against him by compulsion if he refuses, once the conditions for compulsory enforcement under the law are met.
يجب على المدين تنفيذ التزامه عند استحقاقه، فإذا امتنع نفذ عليه جبرًا متى استوفى التنفيذ الجبري شروطه النظامية.
- Article 162
The article provides that an obligation that does not meet the conditions for compulsory enforcement remains owed on a moral basis (diyanah); if the debtor performs it voluntarily, the performance is valid and is neither a gift nor an undue payment.
إذا لم يستوف الالتزام الشروط النظامية لتنفيذه جبرًا يبقى قائمًا في ذمة المدين ديانةً، فإذا وفاه مختارًا كان وفاؤه صحيحًا ولا يُعدُّ تبرعًا ولا دفعًا لغير المستح
- Article 163
The article provides that an obligation owed on a moral basis (diyanah) is a valid foundation on which the debtor may build a legal obligation.
الالتزام القائم ديانةً يُعدُّ أساسًا صالحًا لأن يبني عليه المدين التزامًا نظاميًّا.
- Article 164
The article compels the debtor, after formal notice, to perform in kind where possible, and lets the court, at his request, limit the creditor to compensation if performance is burdensome and causes the creditor no serious harm.
1- يُجبَر المدين بعد إعذاره على تنفيذ التزامه تنفيذًا عينيًّا متى كان ذلك ممكنًا. 2- إذا كان في التنفيذ العيني إرهاقٌ للمدين جاز للمحكمة بناءً على طلبه أن تقصر
- Article 165
The article provides that a right to a thing specified by kind attaches to a particular item only once it is set apart, and lets the creditor, on non-performance, obtain a like item at the debtor's expense.
1- إذا تعلق الحق بشيء معين بالنوع لا بالذات، فإنه لا يختص بشيء بذاته من ذلك النوع إلا بإفرازه. 2- إذا لم يقم المدين بتنفيذ التزامه جاز للدائن أن يحصل على شيء من
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.