The legal environment in the Kingdom of Saudi Arabia witnessed a qualitative leap with the issuance of the Civil Transactions Law, which formalized established rules and provided a clear and stable regulatory framework for financial rights and obligations. Among the important charitable contracts regulated by the law in detail is the “gift contract,” which resolves many legal issues and disputes related to its creation, effects, and revocation.
In this article, we will review in detail the legal provisions governing the gift contract, its conditions of validity, its legal consequences, and the mechanisms and impediments to revoking a gift, according to Articles (366) to (381) of the law.
First: The Concept of the Gift Contract and the Conditions for its Creation
Article (366) defines a gift as: “A contract by which the donor, during his lifetime, transfers ownership of property to the recipient without consideration.” From this definition, it is clear that a gift is a disposition transferring ownership that takes effect during the donor’s lifetime (unlike a will, which takes effect after death) and is characterized by being a donation in its essence.
However, the system established precise parameters and conditions for the creation and validity of this contract:
1. Conditional Gift (Reciprocal Gift): Article (367) permits the donor to stipulate a specific obligation on the donee. If the donor stipulates monetary or in-kind compensation for the gift, the contract moves from being a pure donation to the provisions governing reciprocal contracts (such as sale or barter), depending on the nature of this compensation.
2. Legal Formalities and Documentation (Article 368):
* If the gifted item is real estate: The gift is not valid at all, nor do its effects arise, unless it is officially documented in accordance with the established legal provisions.
* If the gifted item is movable property: The gift is valid either by its official documentation or by the actual “possession” of the movable property, even if this occurs without documentation.
3. Ownership of the Gifted Item (Article 369): The gift contract is not valid if the gifted property is not owned by the donor at the time of the contract, unless the true owner approves this disposition. 4. Gift of Debt and Shared Share:
* A gift of debt to the debtor himself is valid and is considered equivalent to a “release” of the debt (Article 370).
* A partner’s gift of his undivided share in property (whether real estate or movable property) to his other partner or to any third party is valid, even if the property is divisible (Article 371).
Second: Legal Effects of a Gift Contract
Once a valid gift contract is concluded, fulfilling all its requirements, it entails effects and obligations as defined by law, as follows:
* Guarantee of Title and Latent Defects (Article 372): As a general rule, the donor does not guarantee the donee against third-party ownership of the gifted item, nor does he guarantee its freedom from defects (because it is a donation). However, he becomes liable to compensate the donee for any damage incurred if the donor intentionally concealed a defect or title, or if he expressly guaranteed the gifted item to be free from both.
* * Obligation to Fulfill Conditions (Article 373): If a gift is subject to a condition or obligation, the donee must fulfill that obligation, whether it is for the benefit of the donor or a third party.
* Gift Encumbered by Debt (Article 374): If the gifted item is encumbered by a real right (such as a mortgage) in settlement of a debt owed by the donor or a third party, the donee is obligated to pay that debt, but only up to the value of the gifted item itself, unless otherwise agreed upon by the parties.
* Expenses and Costs of the Gift (Article 375): The expenses of the gift contract and the costs of delivering and transporting the gifted item are borne by the donee, unless otherwise stipulated in the agreement. Third: The Mechanism and Provisions for Revoking a Gift
The mechanism for revoking a gift is divided into two main paths, depending on the donee’s consent or lack thereof, as detailed below:
1. Revocation by Mutual Agreement:
The donor may revoke their gift at any time if the donee agrees to return the gifted item, without the need for any legal proceedings (Article 376/1).
2. Revocation by Litigation (in the absence of the donee’s consent):
If the donee refuses to return the gift, the donor has no option but to submit a request for revocation to the competent court. This request is only accepted in three specific cases stipulated in Article (376/2):
* a- Gifts between parents and their children: If the gift is from one parent to their child, and there is a legitimate and justifiable reason for revocation.
* b- Stipulating the Right of Revocation: If the donor explicitly stipulates in the gift deed the right of revocation in specific cases where they have a legitimate purpose. * C. Breach of Obligation: If the gift is conditional (explicitly or implicitly) on a specific obligation of the donee, and the donee breaches this obligation.
Crucial Note (Article 377): The right to revoke a gift is completely extinguished by the death of either party to the contract (the donor or the donee) before the actual or judicial revocation takes place.
Fourth: Impediments to Reclaiming the Gifted Object
Even if one of the aforementioned grounds for judicial revocation exists, the donor may be prevented from reclaiming the “objective” of the gifted object if one of the impediments stipulated in Article (375) is present. These are:
1. The donee’s disposal of the gift: If the donee disposes of the gifted object in a manner that transfers ownership (such as selling or gifting it to another party). If the donee disposes of only part of it, the donor has the right to reclaim the remaining part.
2. Continuous Increase or Fundamental Change: If the gifted object undergoes a significant continuous increase (such as building on the land or the growth of trees), or if the donee alters the object’s features in a way that changes its name or nature (such as transforming fabric into a garment). 3. Destruction of the Gifted Object: If the object is completely destroyed while in the possession of the donee, the donor is entitled to reclaim the remainder. If only part of it is destroyed, the donor reclaims the remainder.
What if the object is not reclaimed? (Article 380)
If the donor’s right to reclaim the object of the gift is forfeited due to the aforementioned impediments, they are not entitled to its monetary value, except in one case: if the gift was conditional upon an obligation which the donee breached. In this case, the donor has the right to claim the value of the object as assessed at the time the right to reclaim it was forfeited.
Fifth: Financial and Compensatory Effects After Revocation
Upon the revocation of a gift (whether by mutual agreement or by court order), the following legal provisions apply:
* Reclaiming the Fruits (Article 378/1): The donor is entitled to the fruits and growth of the object of the gift from the time the donee accepts the revocation (in the case of amicable revocation) or from the time the lawsuit is filed (in the case of judicial revocation).
* Settlement of Expenses and Costs (Article 378/2): The donee is not entitled to claim from the donor any expenses incurred on the gifted item during the period of possession, except for necessary expenses for preserving the property and expenses that increase its value.
* Liability for Loss and Compensation (Article 381): If the donor has the right to revoke the gift and formally notifies the donee to return the gifted item, and the item is subsequently lost while in the donee’s possession, the donee is obligated to compensate the donor for the loss.
Conclusion: The precise regulations governing gift contracts and their revocation in the Saudi Civil Transactions Law strike a fair balance between the donor’s charitable intent and the need to protect the stability of the donee’s and third-party financial transactions. Therefore, it is always advisable to document gift contracts and clearly draft any terms or obligations to avoid future legal disputes.
