An obligation arises when one person acquires the right to demand a specific performance from another. The holder of the right is called the creditor, while the person upon whom performance rests is called the debtor. Performance may consist of transferring a right, delivering property, carrying out an act, refraining from an act, or paying compensation.

The existence of an economic interest or personal expectation alone is not enough to create an obligation. There must be a cause recognized by law and given legal effect. This cause is called the source of the obligation: the event or legal act from which the personal right arises and by which a legal relationship is established between creditor and debtor.

The Civil Transactions Law, issued by Royal Decree No. (M/191) dated 29/11/1444 AH, regulates the sources of obligations in the section on obligations. These include contract, unilateral act, tortious act, unjust enrichment and the related rules on payment of the undue and management of another’s affairs without mandate, and obligations arising directly from law.

The source of an obligation is the legal basis that causes a debt to arise in the debtor’s estate. Identifying that source is important for determining the rules governing the relationship, the conditions under which performance becomes due, how the right is proved, the remedy for non-performance, and the period during which the action may be heard.

The buyer’s obligation to pay the price arises from the sale contract; the obligation of a person who wrongfully damages another’s property arises from a tortious act; the obligation of a person who receives an amount not due to return it arises from payment of the undue; and an obligation imposed directly by a specific provision arises from the law itself.

The financial result may be similar under more than one source, but the applicable rules differ according to the basis of the obligation. Compensation for breach of contract is governed by contractual liability, whereas compensation for harming a person who has no contractual relationship with the liable party is governed by the rules of tortious liability.

Contract as a Source of Obligation

Contract is the most common source of obligations in civil and commercial transactions. It is formed by the connection of offer and acceptance to produce a legal effect, subject to any special form or procedure required for certain contracts.

A contract is based on the agreement of two or more wills to create, amend, transfer, or terminate a legal relationship. Once a contract is validly formed, the rights and obligations agreed by the parties arise, and each party becomes bound to perform what it undertook.

In a sale contract, the seller is obliged to transfer and deliver the sold property, while the buyer is obliged to pay the price. In a lease, the lessor must enable the lessee to use the leased property, while the lessee must pay rent. In a works contract, the contractor must complete the work, while the employer must pay the consideration.

Scope of Obligations Arising from Contract

Contractual obligations are not limited to terms expressly written in the contract. They also include what is considered a necessary incident of the contract according to law, custom, and the nature of the transaction. Accordingly, ancillary obligations may arise, such as:

• •Providing the cooperation necessary to perform the contract.
• •Providing the required data and documents.
• •Maintaining the confidentiality of information.
• •Notifying the other party of facts affecting performance.
• •Not obstructing performance of the obligation.
• •Taking customary measures to preserve the subject matter of the contract.

A contract must be performed in accordance with its terms and in a manner consistent with good faith. A party may not rely on the literal wording of a clause in a way that defeats the lawful purpose of the contract or causes the other party harm inconsistent with the honesty and trust required in dealings.

Effect of Breach of a Contractual Obligation

If one contracting party refuses to perform an obligation, delays performance, or performs it partially or defectively, the other party may invoke the remedies provided by law according to the nature of the contract and the breach, including:

• •Demanding specific performance.
• •Suspending performance of the corresponding obligation.
• •Seeking termination of the contract.
• •Claiming compensation.
• •Exercising rights provided by the contract in the event of delay or breach.

Entitlement to each remedy is subject to its statutory conditions and to the valid provisions of the contract. These consequences confirm that a contract is not merely a record of an understanding; it is a direct source of enforceable obligations that may be claimed and executed.

When Does a Unilateral Act Create an Obligation?

As a general rule, creation of a voluntary obligation requires the agreement of two wills in the form of a contract. Nevertheless, the Civil Transactions Law permits a person to bind himself by a unilateral act in cases provided for by law.

A unilateral act means an independent expression of will by a person intended to impose an obligation upon himself without the creation of that obligation depending on another person’s acceptance, provided that the conditions prescribed by law are met.

The rules governing contracts apply to unilateral acts to the extent appropriate to their nature, except for rules that presuppose two matching wills for the creation of the obligation.

Promise of a Reward

A promise of a reward is the most prominent application of an obligation arising from a unilateral act. It occurs when a person addresses the public with a promise to grant a specified reward to whoever performs a certain act, such as finding a lost item, providing specified information, or achieving a result announced by the promisor.

The promisor is bound to pay the reward to the person who performs the act in accordance with the announced conditions, even if that person performed it without knowing of the promise or without intending to obtain the reward.

If the promisor specifies a period for performing the act, the promise remains binding throughout that period. If no period is specified, the promisor may revoke the promise in the same manner in which it was made or by publicly announcing the revocation, while preserving the right of anyone who completed the act before the revocation was announced in accordance with the applicable rules.

Importance of Precisely Drafting Public Announcements

Some commercial or professional announcements may become a source of obligation if they contain a clear promise of a specified reward or benefit in return for a particular act. The announcement should therefore specify:

• •The act required to be performed.
• •The conditions for entitlement to the reward.
• •The amount of the reward or the method for determining it.
• •The period specified for performing the act.
• •The method for proving that the conditions have been fulfilled.
• •How to deal with multiple persons who complete the act.

Precise drafting helps prevent disputes over whether an announcement is merely an invitation or promotional description, or a binding promise that creates a right for anyone who satisfies its conditions.

How Does an Obligation Arise from a Tortious Act?

An obligation to compensate arises when a person commits a wrongful act that causes harm to another. The Civil Transactions Law provides that every wrongful act that causes harm to another obliges the person who committed it to compensate the injured party.

This source differs from contract because the obligation does not arise from a prior agreement between the liable person and the injured party. Instead, it arises when the harmful event occurs and the statutory conditions are satisfied.

Elements of Liability for a Tortious Act

1. Fault

Fault is conduct that departs from a statutory duty or from the care expected of an ordinary person in the same circumstances. It may consist of a positive act, such as damaging another’s property, or an omission to take an action that should have been taken.

Fault may be intentional, as in deliberate damage, or unintentional, as in negligence, lack of precaution, or failure to take necessary measures.

2. Damage

The fault must result in damage to a right or legitimate interest of the injured person. The damage may be material, such as destruction of property, expenses incurred, or lost income, and it may be moral damage where the conditions for compensation are satisfied.

Compensation includes the loss suffered by the injured person and the gain lost where this is a natural result of the tortious act, taking into account what the injured person could have avoided by exercising the reasonable effort required by the circumstances.

3. Causation

There must be a causal link between the fault and the damage, so that the damage results from the act attributed to the liable person. If it is established that the damage resulted from another independent cause, force majeure, or solely from the injured person’s fault, liability or the amount of compensation will be affected according to the circumstances.

Compensation for Damage

Compensation is assessed in an amount sufficient to fully repair the damage by restoring the injured person to the position he was in, or could have been in, had the damage not occurred.

Compensation may be monetary or in kind where the damage can be removed and the prior position restored. The court takes into account the nature and extent of the damage, its direct effects, the surrounding circumstances, and the extent to which the injured person contributed to causing or aggravating it.

Compensation for a tortious act includes moral damage in accordance with the applicable rules, including physical or psychological harm resulting from interference with a person’s body, liberty, honor, reputation, or social standing.

Meaning of a Beneficial Act

The Civil Transactions Law addresses situations in which one person obtains a benefit at another person’s expense without a lawful cause justifying retention of that benefit, under the rules of unjust enrichment, payment of the undue, and management of another’s affairs without mandate.

This source is intended to prevent unjust financial imbalance between persons. A person who is enriched without lawful cause at another’s expense is obliged, to the extent of the enrichment obtained, to compensate the person who suffered the loss.

No contract between the parties is required for this obligation to arise, nor is it necessary that the enriched person committed a fault. The obligation to restore arises from the receipt and transfer of the benefit without a legal basis justifying the beneficiary’s retention of it.

Unjust Enrichment

Unjust enrichment is established when the following elements are present:

• •An increase or benefit in one person’s estate.
• •A loss or impoverishment in another person’s estate.
• •A connection between the enrichment and the impoverishment.
• •No contract, statutory provision, or lawful cause justifying the enrichment.

The beneficiary’s obligation is limited to the amount of the enrichment and to what compensates the impoverished person for the loss suffered. If the loss exceeds the enrichment, liability is limited to the enrichment actually obtained. If the enrichment exceeds the loss, compensation is limited to the amount of the loss.

Payment of the Undue

Payment of the undue occurs when a person transfers money or a benefit believing that an obligation exists, and it later becomes clear that the debt did not exist or that payment was not due.

Examples include:

• •Transferring an amount to another person’s account by mistake.
• •Paying an invoice that had already been paid.
• •Collecting an amount in excess of what was due.
• •Paying a debt that had already been extinguished before payment.
• •Delivering property to a person who is not its owner because of an error in the information.

A person who receives something not due must return it according to the circumstances and according to whether he acted in good faith or knew that he was not entitled to it. Restitution may extend to fruits or benefits in cases specified by law.

Management of Another’s Affairs Without Mandate

This occurs when a person intentionally undertakes an urgent matter for the account of another person without being legally obliged or authorized to do so.

Examples include a person intervening to repair a serious leak in a neighbor’s property during the neighbor’s absence in order to protect the property from damage, or taking urgent action to preserve another person’s property where it is not possible to contact the owner in time.

The person managing the affairs must continue the work until the beneficiary is able to take over personally, notify the beneficiary of the intervention where possible, exercise the care of an ordinary person, render an account of what was done, and return anything received as a result of the intervention.

In return, where the statutory conditions are met, the beneficiary must perform the undertakings entered into on his behalf, reimburse the person managing the affairs for obligations incurred, repay necessary and useful expenses justified by the circumstances, and compensate him for damage suffered because of the work. The person managing the affairs is not entitled to remuneration unless the work falls within his profession.

Time Limit for Actions Based on Unjust Enrichment, Payment of the Undue, and Management of Another’s Affairs

The Law prescribes a special period for these claims. An action arising from unjust enrichment, payment of the undue, or management of another’s affairs is not heard after three years from the date the creditor knew of his right, and in all cases is not heard after ten years from the date the right arose.

Law as a Direct Source of Obligation

An obligation may arise directly from a statutory provision without being based on a contract, unilateral act, tortious act, or unjust enrichment. In that case, the provision itself creates the right and determines the debtor, creditor, and content of the performance.

The Civil Transactions Law provides that obligations arising directly from law alone are governed by the statutory provisions that created them. This means that the scope, conditions, effects, and methods of claiming the obligation are determined by reference to the specific provision establishing it.

Examples of Obligations Arising from Law

Statutory obligations arise in various fields, including:

• •Obligations arising from certain ownership and neighboring-property relationships.
• •Duties of a guardian, testamentary guardian, or custodian in managing the property of the person whose affairs he oversees.
• •Obligations prescribed to protect certain categories of persons or interests.
• •Duties of restitution or delivery imposed by a specific provision.
• •Obligations of maintenance, support, or preservation where prescribed by law.
• •Obligations imposed by special laws on persons carrying on activities or professions.

These obligations differ from contractual obligations because a person’s will is not the basis for their creation, even if entering the relationship or acquiring a particular status occurred voluntarily. Once the event to which the law attaches the legal consequence occurs, the obligation arises in accordance with the provision governing it.

Identifying the correct source helps determine the applicable rules:

Several sources may surround a single event, but a claim is not built merely by choosing the characterization most favorable to the creditor. The source that corresponds to the true nature of the relationship must be identified.

If the damage results from failure to perform an obligation stated in a contract, liability is in principle contractual. If the damage occurs independently of the contractual obligation or affects a third party, tortious liability may arise where its conditions are satisfied.

Correct classification of the source of an obligation is a fundamental step when preparing claims or defenses in disputes because it affects several matters, including:

• •Identifying the elements of the claim that must be proved.
• •Identifying the party bound to perform.
• •Determining the scope of compensation.
• •Determining the effect of notice or the absence of notice.
• •Identifying available enforcement measures.
• •Knowing the conditions for termination or restitution.
• •Determining the statutory periods for hearing the claim.
• •Assessing the validity of an agreement excluding or limiting liability.
• •Identifying the competent court and any special law applicable where relevant.

An error in identifying the source may lead to building a claim on rules that do not apply to the facts, omitting a necessary element, or seeking a remedy that the law does not provide for that type of obligation.

The sources of obligations determine the legal foundation of personal rights under the Civil Transactions Law. An obligation may arise by agreement of the parties through contract, by a unilateral act in cases provided for by law, as a result of a tortious act requiring compensation, because of enrichment obtained without lawful cause, or directly under a statutory provision.

Identifying the source has practical importance when interpreting the relationship, proving the right, determining obligations, choosing the appropriate claim or remedy, assessing compensation, and identifying statutory time limits. A valid claim does not depend only on the existence of damage or debt, but also on identifying the legal basis that created the obligation and the consequences flowing from it.