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Annulment of Sale Contracts Without A Specified Price

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Annulment of Sale Contracts Without A Specified Price

Sale contracts are legal instruments that are binding on the contracting parties, wherein each party becomes a creditor and debtor, respectively, to the other at the same time. In this case, the seller transfers the ownership of a particular asset to the buyer, in return for the latter’s obligation to pay the agreed-upon monetary compensation.

There are two categories of sale contracts. Firstly, they may be considered an initial contract between contracting parties, or they may be a ‘final contract’, which is registered before the relevant authority in accordance with the conditions established by law (namely, the real estate registry and immovable registry).

The sales contract shall not be valid and enforceable unless it fulfills the basic pillars and conditions for its validity, such as consent that is given in good faith, for a defined place that can be disposed of lawfully, in exchange for the existence of a specified monetary value.

For a valid sales contract to exist, there must be specified cash payment in return for transferring the ownership of the subject matter of the contract. Furthermore, the price must be in proportion to the value of the asset being sold, and the consideration must be monetary. If the buyer pays using any other means of consideration, the contract shall be considered a ‘barter contract’, not a sale contract.

As it is generally recognized, contracts are “pacta sunt servanda”, meaning that they may not be set aside or amended except by agreement of the parties, or for reasons established by law. Moreover, neither party can estimate the price of the item being sold, since this could result in one party overlooking the interests of the other. 

Accordingly, if one of the contracting parties has not agreed explicitly or implicitly to determine the price, or to make it identifiable by stating the bases on which the price can be determined, the sale will be considered void since one of the essential characteristics of its composition will be unfulfilled.

Herein we refer here to one of the cases initiated by our office, where a husband had transferred certain real estate, he owned to his wife without specifying explicitly or implicitly the price thereof or providing identifiable characteristics to assist with the pricing.

When the husband died, Maher Milad Iskandar, the lawyer for the heirs, insisted that this sale was invalid, due to the lack of one of the essential elements for a sales contract, namely, a defined and specified price. The court ruled that the sale contract was indeed invalid for this reason, and said that the price element is essential, and its absence, therefore, leads to the nullification of the entire sale agreement.

Link to case

To conclude, the aim of this article is to highlight that the ‘price’ element must be explicitly or implicitly specified in all sale contracts, or at the very least, parameters for determining the price must be provided, otherwise, the sale will be considered void. 

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Written By

Noor Mahdy - Attorney at Law

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