Article 386 of the Saudi Civil Transactions Law
المادة 386 من نظام المعاملات المدنية · الفصل الرابع: عقد القرض
The lender does not guarantee against a third-party claim to the borrowed money or its defects unless he concealed them or guaranteed it is free of them; the borrower's duty to return an equivalent lapses on a claim, and a defective item is returned at its value as defective.
Official text (Arabic)
This article has not been amended since the law was issued.
1- لا يضمن المقرِض استحقاق المال المقترَض ولا خلوه من العيوب، ولكنه مسؤولٌ عما يلحق المقترض من ضرر بسبب الاستحقاق أو العيب إذا تعمد إخفاء أيٍّ منهما أو ضمن خلو المال المقترَض منهما.
2- إذا استُحق المال المقترَض وهو قائمٌ في يد المقترِض سقط التزامه برد مثله.
3- إذا ظهر في المال المقترَض عيبٌ واختار المقترِض استبقاء المال فلا يلتزم إلا برد قيمته معيبًا.
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 386 explained in plain English
This article regulates what happens when a problem appears in the borrowed money, in three paragraphs:
1- The lender's guarantee: as a rule the lender does not guarantee against a third-party claim to the borrowed money, meaning that someone else turns out to have a right in it, and does not guarantee that it is free of defects. But he is liable for the harm suffered by the borrower because of the claim or defect in two cases:
- If he deliberately concealed either of them.
- If he guaranteed that the borrowed money is free of them.
2- Third-party claim: if the borrowed money is successfully claimed by a third party while it is still in the borrower's hands, meaning it is established that it belongs to someone other than the lender and the money still exists with the borrower, the borrower's obligation to return its equivalent lapses.
3- Defect: if a defect appears in the borrowed money and the borrower chooses to keep it, he is obliged only to return its value as defective, not to return its equivalent in sound condition.
The third paragraph does not state the rule for the case where the borrower does not choose to keep the defective money, and does not specify how the value is to be assessed.
This article is connected to Article 385, which makes void any condition that includes an increase in the repayment of the loan paid by the borrower to the lender, and to Article 387, which specifies when the borrower must repay depending on the term or purpose set.
When a defect or a third-party claim appears in borrowed money, it is advisable to consult a lawyer who specializes in civil cases to assess the rights involved.
Practical example
A farmer in Al-Ahsa borrowed a quantity of fertilizer from his neighbor on condition that he return the same amount, then discovered that it was partly past its effectiveness, and chose to keep it. Under this article he is obliged only to return its value as defective. If the neighbor had known of the defect and deliberately concealed it, he would also be liable for the harm the farmer suffered because of it.
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 386 of the Saudi Civil Transactions Law
Does the lender guarantee against defects in the borrowed money?
As a rule he does not, unless he deliberately concealed the defect or guaranteed that the money is free of it, in which case he is liable for the harm suffered by the borrower.
What if the borrowed money turns out to belong to someone other than the lender?
If it is successfully claimed by a third party while still in the borrower's hands, his obligation to return its equivalent lapses.
What does the borrower return if he finds a defect and keeps the money?
He is obliged only to return its value as defective.
More articles on Loan Contract
- Article 382
The article defines a loan as a contract by which the lender transfers ownership of a fungible thing to the borrower, on condition that the borrower returns its equivalent.
القرض عقد يُمَلِّكُ بمقتضاه المقرِضُ شيئًا مثليًّا للمقترض على أن يرد مثله.
- Article 383
The article provides that a loan contract is formed only when the borrower takes possession of the borrowed thing.
لا ينعقد القرض إلا بقبض الشيء المقترض.
- Article 384
The article requires the lender to have full legal capacity, and prevents a guardian or custodian from lending the money of a person under his authority, or borrowing for him, except in accordance with the legal provisions.
1- يجب في القرض أن يكون المقرض كامل الأهلية. 2- ليس للولي أو الوصي إقراض مال من هو في ولايته ولا اقتراضه إلا وفقًا للنصوص النظامية.
- Article 385
The article makes void any condition, made at the time of the contract or when payment is deferred, that includes an increase in the repayment of the loan paid by the borrower to the lender.
يقع باطلًا كل شرط عند العقد أو عند تأجيل الوفاء يتضمن زيادة في رد القرض يؤديها المقترض إلى المقرض.
- Article 387
The article sets the time for repaying a loan: if a term or purpose was fixed, repayment is not due before it ends; otherwise it is due when the lender asks, unless the borrower would be harmed.
1- إذا عُيِّن للقرض أجلٌ أو غرضٌ لم يلزم المقترض الوفاء قبل انقضاء الأجل أو المدة المعتادة للانتفاع به في مثل ذلك الغرض. 2- إذا لم يعين للقرض أجلٌ أو غرضٌ لزم ا
- Article 388
The article obliges the borrower to return the equivalent of the borrowed thing in amount, type and description when the loan period ends; if returning the equivalent is impossible, he must return its value on the day of borrowing.
يلتزم المقترِض برد مثل الشيء المقترَض مقدارًا ونوعًا وصفةً عند انقضاء مدة القرض، فإذا تعذر رد مثله وجب رد قيمته يوم الاقتراض.
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.