When Does Conduct Constitute Evidence, and How Do Saudi Courts Interpret Corporate Conduct in Contracts?
The interpretation adopted by Saudi courts regarding corporate conduct in contracts is not a novel development; rather, it is an extension of a long-standing judicial methodology grounded in the principle that contractual intent is not understood solely from words, but may be discerned from conduct that evidences acceptance or rejection. The indication of conduct may constitute decisive evidence in commercial contracts and civil transactions.
With the expansion of economic activities and the multiplicity of contractual forms, companies are faced with an important legal reality: practical conduct may give rise to obligations, and implied acceptance may be equal in evidentiary value to a written signature. This has long been affirmed by Saudi court rulings and has recently been articulated with clarity and precision in the Civil Transactions Law, as will be explained in this article.
When Does Conduct Constitute Evidence Before Saudi Courts?
The evidentiary value of conduct is neither an incidental feature of Saudi jurisprudence, nor a concept imported from foreign legislation, nor a recent proposal derived from comparative legal systems. Rather, it is a firmly rooted principle in Saudi judicial practice even prior to codification, and a judicial methodology long applied by Saudi commercial courts as part of the structure of Saudi jurisprudence—one that prioritizes practical reality over form, and what occurs in practice over what is merely written on paper.
Accordingly, the question today—when does conduct constitute evidence?—is not a question of legislative modernity, but one of judicial interpretation of conduct after the introduction of a modern statutory framework that reflects what courts had already been applying in practice. This understanding has become a necessity for companies operating under commercial practices where obligations arise before formal documentation is finalized.
Saudi Courts’ Interpretation of Corporate Conduct in Contracts
For many years, Saudi courts have entrenched two fundamental principles that have become integral to the legal framework of contracting: first, that conduct may be more eloquent than words; and second, that reliance on the indication of conduct is mandatory whenever it clearly evidences intent.
Accordingly, courts have inferred consent from the nature of dealings, extracted intent from the factual context, and read contracts through the course of performance rather than solely by reference to the date of signature. When the Civil Transactions Law was enacted, its objective was not to introduce a new legal philosophy, but rather to codify what had accumulated in judicial practice, in clear statutory provisions—such as Article (33), which recognizes conduct, dealings, and prior practice as complete means of expressing intent, and establishes implied acceptance as an essential component of contract formation.
Judicial Applications of Conduct in Corporate Practice
This judicial philosophy is reflected in numerous applications. When a company receives goods without a written reservation, the judiciary considers such conduct to constitute acceptance of the prices and terms, and subsequent objections do not negate the reality of the transaction.
Similarly, when a contractor enters a project site and commences work, commercial circuits interpret this as implied acceptance, even if the contract has not yet been formally signed, because a company that does not intend to contract does not open its site or enable performance. In such cases, conduct is clearer than any reservation-of-rights language.
The same applies where a contractual relationship continues after the expiry of its written term; Saudi courts have consistently held that the continuation of performance or receipt by both parties constitutes implied renewal of the contract. By their nature, companies do not continue obligations without consent—a consent inferred from conduct rather than repeated signatures.
Here, the role of commercial custom becomes evident, as courts have long relied on it to interpret conduct. Where the parties’ established pattern of dealing is based on acceptance through conduct rather than correspondence, silence itself may constitute effective conduct carrying legal weight.
Commercial Judicial Precedents
In one commercial judicial precedent, a Court of Appeal examined a dispute concerning the rescission of a company sale contract. Despite one party’s assertion that rescission occurred through a signed notice, subsequent facts revealed that this claim was inconsistent with actual conduct. The alleged rescinding party continued to correspond with banks as the company’s owner and requested the freezing of its accounts in his name.
Moreover, the acts relied upon to evidence rescission—such as appointing a new manager or consolidating financial statements—were administrative obligations stipulated under the sale contract itself. Accordingly, the court held that subsequent conduct constituted the strongest evidence, rejected the rescission claim, and ordered the claimant to pay the remaining purchase price.
The Role of Practical Presumptions in Interpreting Corporate Conduct
The judiciary also accords particular importance to practical presumptions as part of the Saudi judicial methodology for inferring intent. Repetition, delivery, silence where silence is not appropriate, reliance on specific conduct without reservation, and prior arrangements—all constitute a practical language that courts read as the strongest evidence of the creation of obligations.
Article 66 of the Law of Evidence and the Interpretation of Corporate Conduct
Despite the strength of the principle of conduct as evidence, the law has not left it without limits. Under Article (5) of the Law of Evidence, the general rule is that obligations do not require a specific form of proof. However, this principle ceases to apply where a special provision requires writing—such as Article (66), which mandates that dispositions exceeding one hundred thousand Saudi Riyals be proven in writing, and prohibits the acceptance of witness testimony or presumptions in such cases.
Articles (84) and (85) further provide that presumptions are admissible only in matters that may be proven by witness testimony. Accordingly, where the law requires writing, reliance on implied conduct is precluded.
Nevertheless, other provisions—such as Articles (37), (44), the provisions on defects (Article 350), and Article (570)—confirm that silence, notification, or abstention may constitute full legal intent. This renders an understanding of these regulatory boundaries essential for interpreting conduct in commercial contracts.
Thus, despite its modern enactment, the new legal framework represents a continuation of existing judicial practice. Expression by conduct, implied acceptance, and reliance on prior dealings are not newly introduced concepts, but rather mechanisms reinforcing commercial certainty and providing a written framework for practices that already existed.
Why Is Understanding Corporate Conduct of Such Critical Importance?
The importance of this understanding is heightened in the corporate environment, because conduct is not merely performance—it is a legal message. Everyday actions such as granting access, receiving goods without reservation, partial payment, or continued receipt of services are, in essence, legal indicators.
Accordingly, managing corporate conduct has become part of legal governance, just like contract management. A signature does not protect a company if its conduct expresses a different intent. As reflected in Saudi court judgments, courts will read conduct before they credit words.
Ultimately, the answer remains clear: conduct constitutes evidence when it conveys only one meaning—acceptance. Corporate conduct becomes a contract when a company acts as though it has consented to the relationship, except where the law provides otherwise. This makes understanding the evidentiary value of conduct essential for every company, executive, and legal advisor, as it is not merely a theoretical concept but a core aspect of practical and judicial reality in Saudi Arabia.
Questions & Answers
When does corporate conduct constitute evidence?
Through the interpretation adopted by commercial courts based on two fundamental principles:
- Conduct may be more eloquent than words.
- Reliance on the indication of conduct is mandatory whenever it clearly evidences intent.
How have Saudi courts interpreted corporate conduct?
This judicial philosophy is reflected in numerous applications. When a company receives goods without written reservation, courts consider this acceptance of prices and terms, and subsequent objection does not negate the transaction. When a contractor enters a project site and commences work, commercial courts interpret this as implied acceptance even if the contract has not yet been signed, because a company that does not intend to contract does not open its site or permit performance—here, conduct is clearer than any reservation language.
What is Article 66 of the Law of Evidence?
All dispositions whose value exceeds one hundred thousand Saudi Riyals (or its equivalent), or which are of unspecified value, must be proven in writing.
Witness testimony is not admissible to prove the existence or termination of the dispositions referred to in paragraph (1) of this Article, unless otherwise agreed or provided by law.
