Article 316 of the Saudi Civil Transactions Law
المادة 316 من نظام المعاملات المدنية · الفرع الأول: المبيع والثمن
In cost-plus, loss and at-cost sales, the seller must disclose everything affecting his capital; the buyer may seek annulment for concealment, or for gross unfairness where capital was not fixed at the time of contracting.
Official text (Arabic)
This article has not been amended since the law was issued.
1- إذا حدد الثمن بناءً على رأس مال البائع في المبيع مرابحة أو وضيعة أو تولية، وجب عليه أن يبين كل ما له تأثير في رأس ماله، وللمشتري طلب إبطال العقد إذا كتم البائع أمرًا ذا تأثير في رأس المال.
2- إذا لم يكن رأس المال محددًا عند العقد وتبين في الثمن غبن للمشتري جاز له طلب إبطال العقد، وللبائع توقي الإبطال إذا قدم ما تراه المحكمة كافيًا لرفع الغبن.
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 316 explained in plain English
This article regulates sales in which the price is fixed on the basis of the seller's capital in the item sold, that is, what the item cost him. These sales have three known forms: murabaha (sale at capital plus a profit), wadi'a (sale below capital), and tawliya (sale at the same capital).
First paragraph: the duty of disclosure.
- The seller must disclose everything that affects his capital.
- If the seller conceals a matter that affects capital, the buyer may request annulment of the contract.
Second paragraph: where capital was not fixed at the time of contracting.
- If gross unfairness to the buyer appears in the price, he may request annulment of the contract.
- The seller may avert annulment if he provides what the court considers sufficient to remove the unfairness.
The article thus protects the buyer who relies on the seller's honesty in stating his cost, and in the second case gives the seller an opportunity to save the contract by removing the unfairness rather than having it annulled.
This article is linked to Article 315, which provides that failing to fix a price does not void the sale where the circumstances show the parties intended the market price or the price used in dealings between them, and Article 317 provides that the price is due immediately unless it is agreed to be deferred or paid in installments for a known term.
The article does not specify the amount of unfairness that permits annulment; that is assessed according to the circumstances of each case. Anyone who believes he was harmed in a sale of this kind should therefore consult a lawyer specialized in commercial or civil cases.
Practical example
Sultan bought equipment from a trader in Jeddah on the basis that the price equaled the trader's purchase cost plus a 10% profit, and then discovered that the trader had concealed a large discount he obtained when buying it, which affected his capital. Under this article Sultan may request annulment of the contract.
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 316 of the Saudi Civil Transactions Law
What is the ruling if the seller hides his true purchase price in a murabaha sale?
If the seller conceals a matter that affects capital, the buyer may request annulment of the contract.
Can the seller avoid annulment of the contract in a case of unfairness?
Yes. If capital was not fixed at the time of contracting and gross unfairness to the buyer appears, the seller may avert annulment by providing what the court considers sufficient to remove the unfairness.
What do murabaha, wadi'a and tawliya mean?
They are sales in which the price is fixed on the basis of the seller's capital in the item sold: with a profit, below it, or at the same amount.
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البيع عقد يُمَلِّكُ بمقتضاه البائع المبيع للمشتري مقابل ثمنٍ نقدي.
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.