Contracts and Compensations: Fundamental Pillars in Egyptian Civil Law
Contracts and compensations are essential elements of the Egyptian Civil Code, where contracts regulate legal relationships between individuals and institutions, and compensations define the mechanisms used to remedy damages resulting from breaches of these contracts.
Firstly: Contracts in Egyptian Law
A contract is a legally binding agreement between two or more parties, involving mutual obligations and rights. According to the Egyptian Civil Code, contracts are classified into several types, including:
Consensual Contracts: Formed by the mere agreement of the parties without requiring specific formalities.
Formal Contracts: Require a specific form for their conclusion, such as official documentation.
Real Contracts: Completion necessitates the delivery of the subject matter of the contract.
Contracts are also divided into nominated and innominate contracts. Nominated contracts are those explicitly designated and regulated by law, such as sale and lease contracts, while innominate contracts are not specifically named and are subject to the general provisions of contracts.
Secondly: Compensations in Egyptian Law
Compensation is the legal means to remedy damage resulting from a contractual breach or a harmful act. Compensation is categorized into three main types:
Judicial Compensation:
Assessed by the judge based on the actual damage suffered by the aggrieved party. According to Article 218 of the Egyptian Civil Code, compensation is not due unless the debtor is formally notified, unless otherwise stipulated.Legal Compensation (Interest):
In cases of delayed payment of a specified monetary amount, the debtor is required to pay compensatory interest at a rate of 4%. This rate may be adjusted by agreement, provided it does not exceed 7%.Agreed Compensation (Penalty Clause):
This is a prior agreement between the contracting parties specifying the amount of compensation in case of a breach. Article 224 of the Civil Code states that agreed compensation is not due if the debtor proves that the creditor has not suffered any damage. The judge may also reduce the compensation if it is deemed excessive.
Conditions for Entitlement to Compensation
To be entitled to compensation, three essential elements must be met:
Fault: A breach of a legal or contractual obligation.
Damage: The aggrieved party must have suffered material or moral harm.
Causal Relationship: A direct link between the fault and the damage must exist.
Article 163 of the Egyptian Civil Code stipulates: "Any fault that causes harm to another obliges the one who committed it to compensate."
The Judge's Role in Assessing Compensation
The judge has discretionary authority to determine the amount of compensation based on the circumstances of each case. The judge may:
Reduce agreed compensation if it is excessive or if the debtor proves partial fulfillment of the obligation.
Adjust or nullify compensation if the creditor's fault contributed to the occurrence or increase of the damage.
Conclusion
Contracts and compensations are fundamental to regulating legal relationships and protecting rights under Egyptian law. Understanding these concepts highlights the importance of adhering to contracts and assessing compensations in proportion to actual damages, ensuring justice and fairness between contracting parties.
