Understanding the legal position of ‘custom of trade’

Understanding the legal position of ‘custom of trade’

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For thousands of years, even long before the evolution of the present judicial system, humans have devised ways of dealing with one another.
While doing so, they always followed an unwritten code of conduct. Even today, when every society has rules and regulations concerning nearly all aspects of human life including trade, there are certain unspoken or unwritten rules that people tend to follow.
In different trades, there are various customs that traders associated with that field strictly follow. However, people sometimes confuse them with actual written laws and regulations.
In today’s article, we will discuss the term “custom of trade” and its legal position in the trade sectors, particularly in the event of a dispute or conflict between two parties.
Simply put, the custom of trade comprises the practices and procedures that traders are accustomed to in their commercial dealings with each other as well as in confronting clients or beneficiaries. In other words, these customs are the rules that are followed in the implementation and regulation of commercial practices and transactions, and they serve as a binding force between these traders. It is interesting to note that some of these practices are also acceptable in a court of law.
In Saudi Arabia, certain conditions have to be met for a custom to gain legal acceptance. For example, a custom should not violate the Shariah. If a custom is against Islamic law, then it is considered null and void and corrupt in nature.
Continuity of a custom is also an important condition. Any new practice or rule is not acceptable, and any party to a business transaction reserves the right to raise objections and reject the imposition of such conditions.
However, if the two parties agree to abide by such a contract and it does not violate any existing laws, then they are free to do business as they please.
But what is the position of the custom of trade if it is in conflict with the law or the actual agreement between the parties?
Certainly, in the event of a conflict between legal texts and these commercial norms, the legal texts shall take precedence.
As mentioned above, these customs of trade are acceptable in a court of law. Judicial authorities, however, need to verify their continuity and check if they do not violate the country’s legal system, which is based on Shariah.

• Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers. Twitter: @dimah_alsharif

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