Commercial Transactions Law · Federal Decree-Law 50 of 2022
Article 88
Book Two: Commercial Obligations and Contracts > Part One: Commercial Obligations
English translation
A creditor may not claim a compound interest, i.e. the interest on the frozen interests, or claim such interests as a complementary compensation.
Official translation, as published by the portal.
Official Arabic text
لا يجوز للدائن المطالبة بفائدة مركبة -وهي الفائدة على متجمد الفوائد- أو المطالبة بتلك الفوائد باعتبارها تعويضاً تكميلياً.
What it means when you sign
This article bars a creditor from claiming compound interest, meaning interest charged on interest that has already built up and remains unpaid. It also bars the creditor from claiming those accumulated interest amounts under the label of complementary compensation, so the same result cannot be reached through a different name.
When you are about to sign a contract, this article means that a clause providing for interest to be added to unpaid interest, or for unpaid interest to roll into the principal and itself earn interest, may run into this prohibition. The same applies to wording that describes such amounts as extra compensation or additional damages. The clauses to look at are those on late-payment charges, interest, capitalisation of unpaid amounts and any compensation for delay. Check whether the interest in the contract is charged only on the original sum or also on interest already owed.
In Fahm reports this article usually sits under: Ambiguity and gaps
Related articles
- Article 86This article deals with interest on late payment of commercial debts.
- Article 87This article lets a creditor ask for extra compensation on top of delay interest, but only where the creditor proves that the loss beyond that interest was caused by the debtor's deception or serious error.
- Article 89This article covers instruments for paying money or delivering goods.
- Article 107This article deals with goods that, once delivered, turn out to differ from what was agreed in quantity or type, or to be defective.
- Article 108Cited in Fahm reportsThis article sets time limits for a buyer who finds that delivered goods differ from the agreement or are defective.
- Article 109This article allows a seller of goods protected by a registered trademark to agree with the buyer that the buyer will not resell below a certain price.