Regulating private legal relationships (Part II)
The first article on this subject provided an overview of the basic elements of contract such as offer and acceptance and principles of contract recognized under the Oman Commercial Law and the Electronic Transactions Law. Another Omani law that is important in the context of contractual relationships is the Oman Civil Transactions Law set out in Royal Decree 27/ 2013 (the “Code”).
By way of background, civil code is a legislative enactment that codifies a country’s private law such as contracts, property, family law, agency etc. The objective of the civil code is to import more certainty by having written rules to regulate private legal relationships.
The Code contains robust rules on all aspects of a contract ranging from contract formation and interpretation to the termination of contracts as well as the rights and remedies of contracting parties post contract termination.
In terms of the Code, a contract comes into existence by virtue of the confluence (translated: convergence) of offer and acceptance. In other words, a contract comes into existence once an offer and acceptance are made that pertain to the same subject-matter, ie there is a proverbial “meeting of minds” of the parties. This concept is also mirrored in Article 2 of the Oman Commercial Law.
The Code requires that an offer and acceptance must be an expression of intent to create a contract. This expression of intent can be in one of the following ways: Orally, in writing, through an exchange of customary adopted signs that demonstrate mutual consent, or by adopting any other course by which the circumstances leave no doubt that they demonstrate mutual consent of the parties.
The Code distinguishes between an “offer” and an “invitation to offer” and states that in relation to offers or orders, if there is a publication, an advertisement, a current price list, or other statement which is doubtful in nature, then the same would not be deemed an offer but only an “invitation” to enter into a contract, unless absolute evidence exists to establish that it was intended as an offer.
Based on the above, businesses floating invitation to tender or soliciting offers in relation to goods or services must ensure that the terms and conditions of the invitation are unequivocal and do not, expressly or impliedly, tantamount to an “offer” which, once accepted by another party, would give rise a contract.
The Code also contains rules on the rescission/cancellation of an offer. In respect of offers that are not made specifically time-bound by the offeror, the offeror has the option to retract the offer after making it, prior to it being accepted by the other party. Moreover, an offer is deemed cancelled or rescinded if either party says or does anything to demonstrate the intention to renounce or cancel the offer. On the other hand, once a time bound offer has been made, it cannot be retracted until expiry of the time set by the offeror for the offer to remain valid.
The Code also specifies the circumstances when the acceptance of an offer would, instead of giving rise to a contract, constitute a counter-offer. This is when the acceptance either (i) exceeds the subject matter of the offer; or (ii) places a restriction on the offer; or (iii) varies it, in which cases, the original offer is deemed rejected and a new offer (or counter-offer) is deemed to come into existence. This rule under the Code reflects the fast pace at which an array of offers and counter-proposals are typically involved in commercial transactions before a contract is concluded.
The Civil Code provides that if contracting parties agree on the essential elements of the contractual obligations and details of the remainder of the conditions which both parties regard as essential are to be agreed later, then the contract would be deemed to have come into existence with respect to the agreed obligations. In other words, so long as the parties have agreed to the essential contractual obligations and they “agree to agree” on the remainder of the contractual conditions in future, the contract would nevertheless come into existence with respect to the agreed obligations.
The Code provides that if a dispute arises between the parties with regards to any conditions or obligations that were to be agreed in future, then the Courts would adjudicate upon the matter in accordance with the nature of the transaction and the provisions of law and customs.
Despite that the Code enables judges to interpret and resolve disputes by resorting to law and custom to fill the “gaps” in contracts through judicial interpretation, for the sake of certainty, contracting parties should ensure that the entire subject-matter of the contract is reduced to writing and no contractual matters are left to be agreed in future.