Saudi Arabia approves 271-article Commercial Transactions Law

Saudi Arabia has approved a 271-article Commercial Transactions Law covering commercial activities, contracts, merchants and trade papers. The Cabinet approved the law during a meeting chaired by Crown Prince and Prime Minister Mohammed bin Salman in Riyadh, the Saudi Cabinet announced. The law takes effect 180 days after publication in the Official Gazette.

Replaces three existing laws#

The Commercial Transactions Law replaces three pieces of legislation: the Commercial Law, the Commercial Papers Law and the Commercial Books Law, according to the Ministry of Commerce. The framework regulates commercial activities, merchants, commercial establishments, related obligations and contracts, accounting records and commercial papers including bills of exchange, promissory notes and checks. Minister of Commerce Majid Al-Kassabi said the law covers commercial sales, supply sales, brokerage agreements and commercial agency agreements.

Commercial contracts and merchant obligations#

The law sets out the rights and obligations of parties to commercial sales, supply transactions, commercial agencies and brokerage agreements. It establishes which activities are classified as commercial acts, separating activities that gain commercial character from one transaction from those requiring repeated professional conduct to qualify. The legislation sets out the legal status of a merchant and the obligations that apply when conducting commercial business. The Ministry of Commerce said the framework provides statutory provisions governing commonly used business arrangements.

Commercial papers and payment instruments#

The law brings rules governing commercial papers into the commercial-transactions framework. Its provisions cover bills of exchange, promissory notes and checks, which are used in commercial payments and credit transactions. These instruments are currently governed by the existing Commercial Papers Law until the new law takes effect. The Ministry of Commerce said the framework addresses commercial dealings and the ability of small and medium-sized enterprises to expand through commercial contracting and agency arrangements. The changes apply to companies and small and medium-sized enterprises that use supply agreements, sales contracts, agency structures and intermediaries.

Effective date and implementation#

The law enters into force 180 days after its publication in Saudi Arabia's Official Gazette. The framework complements the Kingdom's Civil Transactions Law, according to the Ministry of Commerce. The legislation addresses commercial activities, merchants and commercial establishments, along with related obligations and contracts. It also covers accounting records and the commercial papers used in business transactions.