Regulation of installments under Egyptian civil law – Company law / Commercial law
Egypt: Regulation of installments under Egyptian civil law
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A sales contract is a legally binding document which is generally irrevocable after its conclusion. In principle, contracts cannot be revoked due to the will of one of the parties, hence; the legal terminology contract with the deposit has been drawn up.
When a pre-sales contract is concluded, the two parties agree on a deposit which is a percentage of the full purchase price paid by the buyer. On the one hand, a down payment can be seen as a means of guarantee for the parties, securing the seller’s right by forcing the buyer to perform the contract, and securing the buyer’s right by preventing the seller from agreeing to the contract. ‘other offers. On the other hand, the existence of a deposit also authorizes each of the parties to revoke its offer, in exchange for the loss of the deposit paid.
The notions of “refund of the deposit” and “the penalty clause” can be confused in the contract. A deposit is not refundable if the transaction fails because of the buyer, however, in the event that the seller is the revoking party, the buyer has the right to
double the deposit paid.
The return of the deposit is not considered as a means of repairing the damage suffered by the other party as a result of the revocation, provided that the terms exist, even if no damage has occurred. A judge can therefore grant additional compensation together with the reimbursement of the deposit, in the event of bad faith on the part of the debtor and against the provisions of his contractual liability.
On the other hand, a Penalty clause which is predetermined in the contract obliges the defaulting party to provide some form of compensation to the injured party in the event of breach of contract, and the judge can reduce this compensation if it is exaggerated.
Egyptian courts have dealt with issues in which the will of the seller and / or buyer is not clear when paying the down payment as it is difficult to distinguish in many cases, especially when contractors do not not explicitly expressed their will. From this perspective, the general rule is to assess the intention of the contractors since it reveals the purpose of the down payment, namely whether it is paid to perform the contract and ensure its performance, or as a means of allowing contractual revocation.
We refer below to one of the cases initiated by our firm, in which the Cairo Court of Appeal ruled for the
return of double the deposit amount, in addition to a penalty of 4% of the total amount, to be paid annually, from the date of the legal claim.
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Considering the importance of down payments in day-to-day business transactions, it is necessary to ascertain the meaning of the down payment, as defined by law and as established by Egyptian courts.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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