Article 5 of the Saudi Finance Lease Law
المادة 5 من نظام الإيجار التمويلي
If the lessor authorizes the lessee in writing to receive the asset directly from the supplier, receipt must be by a record stating its condition, and the lessee may refuse if the supplier will not sign it.
Official text (Arabic)
This article has not been amended since the law was issued.
إذا فوض المؤجر المستأجر - كتابة - بتسلم الأصل المؤجر مباشرة من المورد أو المنتج أو المقاول وفقًا للشروط والأوصاف المحددة في العقد، فيجب أن يكون التسليم بموجب محضر يثبت فيه حالة الأصل المؤجر، ويكون المستأجر مسؤولًا تجاه المؤجر عن أي بيان عن الأصل أثبت في محضر التسلم الموقع. وإن امتنع المورد، أو المنتج، أو المقاول عن توقيع المحضر، فللمستأجر رفض تسلمه.
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 5 explained in plain English
The lessee often receives the asset directly from the supplier, producer or contractor without going through the lessor. This article sets controls for this receipt:
- Written authorization: the rule begins if the lessor authorizes the lessee in writing to receive the asset directly under the terms and descriptions set in the contract.
- The receipt record: delivery must be by a record that states the condition of the leased asset.
- The lessee's responsibility for the record: the lessee is responsible to the lessor for any statement about the asset recorded in the signed receipt record, so if it signs that the asset is sound and conforming, it is responsible for that to the lessor.
- The right to refuse: if the supplier, producer or contractor refuses to sign the record, the lessee may refuse to take delivery.
The practical lesson is that the lessee should inspect the asset well before signing the record, because what is recorded in it can be used against it before the lessor.
The article is linked to Article 4, which allows the lessee to specify the asset's description with the supplier, producer or contractor and makes it responsible for that, and to Article 6, which requires the lessee to pay the rent even if it does not benefit from the asset unless the lack of benefit is due to the lessor, and requires repayment of rent paid in advance if delivery of the asset or benefit from it is not possible for a reason not attributable to the lessee.
Practical example
Sarah owns a bakery in Madinah and leased new ovens under a finance lease, and the lessor company authorized her in writing to receive them directly from the supplier. On delivery she noticed that one oven was scratched, and asked for this to be recorded in the record. When the supplier refused to sign the record, she was entitled to refuse to take delivery of the ovens.
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 5 of the Saudi Finance Lease Law
Can I receive the leased asset directly from the supplier?
Yes, if the lessor authorizes you in writing, with receipt under the terms and descriptions set in the contract and by a record stating the asset's condition.
What do I do if the supplier refuses to sign the receipt record?
The lessee may refuse to take delivery of the asset if the supplier, producer or contractor refuses to sign the record.
Am I responsible for what I sign in the receipt record?
Yes, the lessee is responsible to the lessor for any statement about the asset recorded in the signed receipt record.
More articles on The Finance Lease Contract
- Article 3
The article requires the finance lease contract to be written or electronic with specified data, to be recorded in the register of contracts, and any amendment to be attached to it.
يجب أن يحرر عقد كتابي أو إلكتروني بين المؤجر والمستأجر، يتضمن بيانات تتعلق بالعاقدين، والأصل المؤجر، وحالته، والأجرة، وآجال سدادها، ومدة العقد، وشروطه، ويسجل لا
- Article 4
The article allows the lessee to specify the asset's description with the supplier, producer or contractor before the contract, makes the lessee responsible for that, and binds the lessor only within the limits of its approval.
يجوز للمستأجر قبل إبرام العقد تحديد أوصاف الأصل المراد استئجاره مع المورد أو المنتج أو المقاول، ويكون المستأجر مسؤولًا عما يترتب على تحديده لأوصاف الأصل. وإن حد
- Article 11
The article allows the lessee to assign the finance lease contract to another lessee on condition of the lessor's consent, and refers the details to the Regulations.
يجوز للمستأجر التنازل عن العقد إلى مستأجر آخر بموافقة المؤجر، وتوضح اللائحة أحكام ذلك.
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.