Court Dismisses BD24,000 Claim Over Undocumented Commercial Registration Sale

Manama: The Fourth High Civil Court has dismissed a lawsuit seeking to compel payment of BD24,000 for the sale of a commercial registration, ruling that the underlying contract was invalid because it was not officially documented.

The case stemmed from an agreement between a plaintiff and a defendant to sell a sole proprietorship’s commercial registration for BD30,000. The defendant had paid BD6,000, leaving a claimed balance of BD24,000. However, the agreement collapsed within two months after the plaintiff demanded payment of the remaining amount.

During the proceedings, attorney Sarah Atiq, representing the defendant, argued that the plaintiff violated the original agreement on the distribution of partnership shares by allocating 1% to himself and 99% to her client, contradicting the terms of the alleged sale. She further maintained that the contract was never officially notarised or registered, and that the plaintiff failed to transfer full ownership of the commercial registration, calling for the dismissal of the case.

In its ruling, the court stated that the plaintiff’s claim was based on a customary sales contract that had not been notarised or registered. It stressed that the sale of a commercial establishment is a formal legal transaction that must be documented before a notary public, registered in the commercial register, and published in a local newspaper.

The court found that both parties had acknowledged that the contract was undocumented, rendering it absolutely null and void, with no legal effect between the parties or toward third parties. As the matter relates to public order, the court said it must be addressed on its own initiative.

The court further noted that any actions based on a void contract are themselves void, including the establishment of a company in which the plaintiff retained a 1% share. It concluded that this arrangement was merely a guarantee for payment and did not constitute a genuine partnership or renewal of the original obligation.

As the plaintiff’s claim effectively sought enforcement of a void contract, the court ruled it was legally impermissible and dismissed the case in full.