The Omani Civil Transactions Law, issued by Royal Decree No. 29 of 2013, sets detailed rules for how a contract is formed, what makes it valid and how courts treat it afterwards. A foreign investor who signs in Oman with assumptions from home law can be surprised, for example by the rule on earnest money or by the court's power to reduce a burdensome obligation. This article explains those rules from the Arabic text of the law. The cited articles were checked against the Arabic text published by the Ministry of Justice and Legal Affairs. Article numbers refer to the Civil Transactions Law. We support clients in Oman through our partners there.
Definition, and named and unnamed contracts
Article 66 defines a contract as the connection of offer with acceptance, and their agreement in a way that establishes its effect on the subject matter. Article 68 applies the general rules to named and unnamed contracts alike, while special rules for particular civil contracts come from the provisions that govern them. A new type of commercial contract does not escape the general rules just because it has no name. Under Article 67, a contract may concern goods, the benefit of goods, a defined work or service, or anything else that is not forbidden by Sharia or by a legal text.
When a contract is concluded
Under Article 69, a contract is concluded as soon as offer and acceptance connect, subject to any special form the law requires. The first expression of will is the offer and the second is the acceptance. Article 70 allows will to be expressed in speech, in writing, by a sign customarily used, or by a position that leaves no doubt in the circumstances about its true meaning. Article 72 adds that a statement in the future tense that amounts to a bare promise can form a binding promise if the parties meant it that way.
Displaying goods, advertising and offers
Under Article 73, displaying goods or services with their price counts as an offer. Publication, advertising, quoting current prices and requests addressed to the public are not an offer but an invitation to contract, unless conclusive indications show that an offer was meant. For a business that publishes price lists to the Omani public, the difference between a display and an advertisement is the difference between an obligation and an invitation to negotiate.
Silence, the session and how long an offer lasts
Article 74 states that no statement is attributed to a person who is silent. Even so, the silence of the person to whom the offer is addressed counts as acceptance if it comes with something that shows consent. In particular, silence counts as acceptance where there is a continuing course of dealing built on the offer, or where the offer is for the benefit of the person receiving it. Under Article 75 the parties have the option after the offer until the end of the contract session, and a word or act showing rejection by either one ends the offer. Article 76 says that repeating the offer before acceptance cancels the first, so the last offer counts. Under Article 77, if a time for acceptance is set, the offeror must keep the offer open until it ends.
The mirror rule, and contracts at a distance
Article 78 requires acceptance to match the offer. If acceptance comes with a change or a restriction, it counts as a rejection that contains a new offer. Article 79 covers the case of an agreement on the essentials with details left for later. If the parties did not say that the contract fails if they cannot agree on those details, the contract is concluded, and a court decides disputed details by the nature of the dealing, the provisions of law and custom. A letter of intent that covers the essentials may therefore be a contract. To avoid this, state clearly that nothing binds the parties until a final signed agreement exists.
Under Article 80, if the parties are not in the same session, the contract is treated as made at the place and time at which the offeror learns of the acceptance, unless there is an agreement or legal text that says otherwise. The offeror is presumed to have learned of it where and when it reached him, unless evidence shows otherwise. Under Article 81, a contract by telephone or similar means is treated, as to place, as made between parties who are not in one session, and, as to time, as made between people present in one session. In cross-border trade these two articles fix where and when your contract was formed.
Auctions and adhesion contracts
Under Article 82, a contract in an auction is formed only when the auction is awarded. A bid lapses when a higher bid is made, even a void one, or when the auction closes without an award. Under Article 83, acceptance in adhesion contracts is limited to submission to uniform terms set by the offeror, which allow no discussion.
Whoever imposes a standard form should know two later articles. Article 158 allows the court to modify arbitrary terms of an adhesion contract, or to release the adhering party from them, as fairness requires, and any agreement to the contrary is void. Article 166 says doubt is interpreted in favor of the debtor and, in adhesion contracts, in favor of the adhering party.
Earnest money in Oman: the contract is final
Article 84 provides that payment of earnest money is evidence that the contract has become final and that no one may withdraw from it, unless an agreement or custom says otherwise. This is stricter than the rule many investors expect, since in some systems earnest money gives each side a right to withdraw. In Oman, paying it, by default, shows the deal is closed. If you want a right to withdraw, say so in the contract and say what happens to the money.
Signing through a representative
Under Articles 85 and 86, a person may contract directly or through a representative, and the document of authority sets the limits of agreed representation. Article 87 says that in representation, the representative, not the principal, is the person considered when assessing defects of will. Under Article 88, a contract made within the representative's powers in the principal's name binds the principal. If the representative did not disclose that capacity, or contracted in his own name, the effects fall on him, unless the other party knew or must be presumed to have known of the representation, or did not care whether he dealt with the principal or the representative. Under Article 90, a representative may not contract with himself without the principal's permission, though the principal may approve it afterwards. Ask for the power of attorney and read its scope before signing.
Capacity and defects of consent
Article 91 gives every person capacity to contract unless the law removes or limits it. Under Articles 92 and 93, the acts of a minor who cannot discriminate are void. The financial acts of a discerning minor are valid if purely beneficial, void if purely harmful, and suspended on approval by the guardian or by the minor on reaching majority if between the two. Article 97 requires a person with limited capacity who used fraud to hide it to compensate the other party.
The Law deals with the following defects:
- Duress (Articles 98 to 101). Duress is forcing a person without right to do what he does not accept, through a threat to life, a limb, serious harm, honor or property. The contract of a coerced person takes effect only if he or his heirs approve it after the duress ends.
- Misrepresentation and gross imbalance (Articles 103 to 108). Misrepresentation means deceiving the other party by words or acts so that he makes a contract he would not otherwise have made, and deliberate silence counts if the deceived party would not have contracted had he known. It removes the contract's binding effect and lets the deceived party seek rescission. A claim for rescission for misrepresentation is not heard after one month from the date of knowledge, and a claim for gross imbalance not after one year from the contract. Under Article 107, rescission for gross imbalance alone, without misrepresentation, is limited to the property of those under guardianship, endowment property and state property, and the other party in an exchange contract may avoid rescission by offering what the court considers enough to remove the imbalance. A contract concluded by public auction cannot be challenged for imbalance.
- Mistake (Articles 109 to 114). A mistake counts only if it appears in the wording of the contract or from the circumstances, the nature of things or custom. A mistake about the nature of the contract, a condition of its formation or the subject matter makes the contract void (Article 110). A mistake about a desired matter, such as a quality of the subject matter, the identity of the other party or a quality of that party, allows rescission (Article 111), and so does a mistake of law if the conditions for mistake of fact are met (Article 112). A calculation or writing slip does not affect validity but must be corrected (Article 113).
Void, defective and suspended contracts
Article 123 describes a sound contract as one that is lawful in its basis and its description. Under Article 124, a defective contract can become sound if the cause of the defect ends. Under Article 125, a void contract has no effect, cannot be ratified, and any interested person may rely on its voidness, and the court may declare it on its own motion. A claim of voidness is not heard after fifteen years from the contract. If only part of a contract is void, the whole is void unless each part's share is fixed, in which case only the void part falls (Article 126). Under Article 127, a void contract that meets the conditions of another contract may stand as that contract if the parties' intention points to it.
Performance: the contract binds, with one exception
Article 155 gives a sound contract its effect on the subject matter and the price as soon as it is concluded, and each party must perform his obligations. Under Article 156, the contract must be performed as written and covers what its nature requires under the law, custom and fairness. Where reciprocal obligations in a contract binding both sides are due, Article 157 lets either party withhold performance if the other has not performed what he owes. Article 167 says that a sound binding contract may not be rescinded or modified by one party, only by agreement or by judgment.
Article 159 is the rule that most surprises foreign parties. If general exceptional events that could not be foreseen at the time of contracting occur, and performance, though not impossible, becomes so burdensome to the debtor that it threatens him with heavy loss, the court may, depending on the circumstances and after balancing the interests of both sides, reduce the burdensome obligation to a reasonable level. Any agreement to the contrary is void. A fixed price clause does not remove this power.
If a party fails to perform in a contract binding both sides, the other may, after giving notice to the debtor, ask for performance or rescission, and the court may order immediate performance, grant a period, or rescind while the refusal continues (Article 171). If force majeure makes performance impossible, the matching obligation ends and the contract is rescinded automatically (Article 172). An agreement that the contract is rescinded automatically on non-performance is allowed, but it does not remove the need for notice unless the parties expressly agree to waive it (Article 170).
What we review before signing in Oman
We review whether a price display or letter of intent can bind, the chain of offers and acceptances, the earnest money clause, standard terms, the power of attorney of the signatory, and clauses that try to exclude judicial revision of a burdensome obligation. We provide this service to our clients in Oman through our partners there.
Read also: Oman Foreign Capital Investment Law: Investor Guarantees | Oman LLC Compliance After Incorporation: A Legal Guide
Frequently asked questions
Is displaying goods with their price a binding offer in Oman?
Yes. Displaying goods or services with their price counts as an offer under Article 73. Advertising and price statements to the public are an invitation to contract unless conclusive indications show an offer was intended.
Can you withdraw from a contract after paying earnest money in Oman?
By default no. Article 84 treats payment as evidence that the contract has become final, unless an agreement or custom says otherwise.
Does silence count as acceptance in Omani law?
Not by itself. Silence counts as acceptance if it comes with something that shows consent, especially where there is a course of dealing built on the offer or the offer benefits the person receiving it (Article 74).
Can an Omani court change a contract because performance became too costly?
In the case Article 159 describes: exceptional general events that could not be foreseen and that make performance burdensome enough to threaten heavy loss. The court may reduce the obligation to a reasonable level, and a clause to the contrary is void.
Do you review commercial contracts in Oman?
Yes. We review our clients' contracts in Oman before signature and in disputes, through our partners there.