The Dilemma of Simulated Contracts: Navigating the Evolving Landscape of Fraud Against the Backdrop of Legislative Inertia in Common and Civil Law Jurisdictions.

Abstract

This study aims to explain the legal status of simulated contracts in Islamic law as applied in Saudi Arabia and the Civil law used in Egypt and the Common law used in USA, and their impact, as well as to outline the judiciary's position in these jurisdictions regarding these contracts. The study uses an inductive and analytical approach to explain most of the research comparing the legal status legal status and judicial applications in these three jurisdictions. The research concludes that, in a general sense, simulation in contracts involve both parties colluding to hide their true intentions under a false appearance for mutual benefit. This concept of simulation is similar to the concept of legal stratagems known in Islamic law. If simulated contracts do not undermine legitimacy or contradict a legal interest, they are permissible. However, if they do the opposite, they are prohibited and forbidden. Relying on the Fiqh rule stating that “The essence of contracts is determined by their intended purposes and meanings, not by their wording and structure.” meaning that the essence of contracts lies in their intended purposes, not in their outward appearance, surprisingly, an equivalent principle is found in the USA legal system “Substance over form”. It is important to note that the U.S. prioritizes economic reality, while the Middle Eastern systems emphasize the subjective intent and potential for deception, which will be further explained later. Moreover, the Saudi judiciary does not consider the outward appearance of a contract if it is proven that the contract's reality is different. The Egyptian law, by which the Saudi new legislations are greatly affected, provides for the same rule as the true intent of the parties prevails over the form of the simulated contract. This rule has been applied by the Egyptian judiciary in application to the Egyptian Law.