Article 566 of the Saudi Civil Transactions Law
المادة 566 من نظام المعاملات المدنية · الفرع الأول: أحكام عامة
The article defines the output-sharing contract as one in which the capital owner hands a non-consumable thing to a person who exploits it in return for a joint share of the output.
Official text (Arabic)
This article has not been amended since the law was issued.
المشاركة في الناتج عقد يسلم رب المال بمقتضاه شيئًا غير قابل للاستهلاك لمن يستغله مقابل جزء شائع من الناتج.
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 566 explained in plain English
This article defines the output-sharing contract, and the definition rests on specific elements:
- The capital owner: the party who hands over the thing.
- The subject matter: a thing that is non-consumable, that is, a thing whose substance remains despite its use.
- The worker: the party who receives the thing in order to exploit it.
- The return: a joint share of the output, that is, a proportion of what the exploitation produces.
This contract is distinguished by the fact that the return is not a fixed sum but a proportion of the actual output, so each party's share is tied to what is produced.
This article is linked to Article 567, which sets out the obligations of the parties: the capital owner must enable the worker to work as agreed, and the worker must exercise the care of an ordinary person and preserve the property, with the expenses of preserving the asset and of exploiting it divided between them unless otherwise agreed.
To draft a contract of this kind, it is best to state clearly the thing handed over and each party's proportion of the output, and you can use a lawyer who specializes in commercial contracts.
Practical example
Hamad owns a water-bottling machine in a small factory in Al-Kharj, and he handed it to Adel to operate, on the basis that Hamad gets 30% of the bottles the machine produces and the rest goes to Adel. This is an output-sharing contract: the machine is a non-consumable thing, and the return is a joint share of the output.
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 566 of the Saudi Civil Transactions Law
What is an output-sharing contract?
A contract under which the capital owner hands a non-consumable thing to a person who exploits it in return for a joint share of the output.
Can the subject of an output-sharing contract be something that is consumed?
The definition requires the thing handed over to be non-consumable.
Is the return in an output-sharing contract a fixed sum?
Under the definition, the return is a joint share of the output.
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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.