Article 363 of the Saudi Civil Transactions Law
المادة 363 من نظام المعاملات المدنية · الفصل الثاني: عقد المقايضة
Adding cash to one consideration to make up a difference in value does not change an exchange, unless that consideration is worth less than the cash added, in which case the contract becomes a sale.
Official text (Arabic)
This article has not been amended since the law was issued.
لا يُخرِجُ المقايضة عن طبيعتها إضافة نقد إلى أحد العوضين لتعويض الفرق في القيمة، إلا إذا كان ذلك العوض أقل قيمة من النقد الذي أضيف إليه، فيصير العقد بيعًا.
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 363 explained in plain English
People often swap two things that are not equal in value, with one paying a sum of cash to make up the difference. This article answers the question: does the contract remain an exchange or become a sale?
The article sets a rule and an exception:
- The rule: adding cash to one of the considerations to make up the difference in value does not take the contract out of being an exchange.
- The exception: if the consideration to which the cash is added is worth less than the cash added to it, the contract becomes a sale.
The test is therefore a comparison between the value of the thing and the amount of cash added to it: if cash is the larger part of that side of the contract, the contract is in reality a sale; if the thing is of higher value, the contract remains an exchange.
The importance of this distinction appears in the rules to be applied: exchange has its own rules, such as Article 364, which divides the costs of the contract equally between the parties unless they agree otherwise, whereas a sale is subject to its own rules. Article 362 also treats each party to an exchange as the seller of what he exchanged and the buyer of what he received in exchange.
Assessing value in a particular case may be disputed, and a lawyer specialized in civil cases should then be consulted.
Practical example
Majed agreed with a person in Jeddah to swap his car for another, newer car, with Majed paying a sum of cash in addition to his car to make up the difference. If the value of Majed's car is greater than the sum he added, the contract remains an exchange; if the value of his car is less than the sum added to it, the contract becomes a sale.
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 363 of the Saudi Civil Transactions Law
Does the contract remain an exchange if one party pays a cash difference?
Yes in principle; adding cash to make up a difference in value does not take an exchange out of its nature.
When does an exchange turn into a sale?
If the consideration to which the cash is added is worth less than the cash added, the contract becomes a sale.
Why does the distinction between exchange and sale matter?
Because each contract has its own rules, for example the equal sharing of the costs of an exchange under Article 364 unless otherwise agreed.
More articles on Sale Contract
- Article 23
The article defines consumable things as those whose use, according to what they are prepared for, is limited to consuming or spending them, and treats everything prepared in stores for sale as consumable.
الأشياء القابلة للاستهلاك هي التي ينحصر استعمالها -بحسب ما أُعدّت له- في استهلاكها أو إنفاقها، ويعد قابلًا للاستهلاك كل ما أعد في المتاجر للبيع.
- Article 44
Paying earnest money gives only the payer the right to withdraw from the contract without recovering it, unless otherwise agreed; the court sets the withdrawal period if the parties have not.
1- دفع العربون عند إبرام العقد يفيد أن لدافع العربون وحده الحق في العدول عن العقد، وليس له إذا عدل أن يسترد مبلغ العربون، وذلك كله ما لم يتفق على خلافه. 2- إذا
- Article 109
The article provides that exchange contracts are concluded on the basis that the subject matter is free of defects except what custom tolerates, and that an intolerable defect is a breach of the obligation.
تُعدُّ عقود المعاوضات منعقدةً على أساس سلامة محل العقد من العيوب إلا ما جرى العرف على التسامح فيه، فإذا تبيَّن في المحل عيبٌ لم يجر العرف على التسامح فيه؛ عُدَّ
- 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
- Article 166
The article places the risk of destruction or damage on the debtor who failed to deliver, in two cases: transfer of a real right and an obligation to perform work involving delivery, each on different conditions.
1- الالتزام بنقل حق عيني يتضمن الالتزام بتسليم الشيء والمحافظة عليه حتى تسليمه، فإذا لم يقم المدين بتسليمه حتى هلك أو تلف كانت تبعة ذلك عليه. 2- إذا كان محل الا
- Article 307
Article 307 defines sale as a contract under which the seller transfers ownership of the item sold to the buyer for a cash price.
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.