Explanation of Article 617

Explanation of Article 617

The article regulates one of the voluntary restrictions on ownership, which is the condition prohibiting disposition, such as when the seller stipulates that the buyer should not sell or gift the sold item, or when the donor in a gift contract or the testator in a will imposes such a condition.

The article establishes that the default rule is the inadmissibility of the condition prohibiting disposition; whether the disposition containing the prohibitive condition is a transfer of ownership such as a sale or gift, or whether the disposition containing the prohibitive condition establishes another real right; such as when the owner transfers the right of usufruct and stipulates that the beneficiary should not dispose of this right. The default is the inadmissibility of this condition; hence, the article begins with a negation, stating that the owner cannot impose conditions in his disposition that prevent the transferee from disposing of the property. The reason for this is that such a condition leads to the creation of a real right unknown to the system, and the authority of will is insufficient to modify the right of ownership; because the system of ownership and the rights derived from it are connected to the general economic system of society. Therefore, any modification in the right of ownership is void; however, there may be practical cases where the circumstances of dealings necessitate the approval of such a condition. Therefore, the article exempts from prohibition any case where two conditions are met: the first condition is that the purpose of the condition is to protect a legitimate interest of the disposer, the transferee, or a third party.

An example of a legitimate interest for the disposer is when a person sells his house to another and retains for himself the right of usufruct for the duration of his life; he stipulates that the buyer should not dispose of the house during this period so that the seller does not have to deal with an unknown owner of the property, or the seller stipulates that the buyer should not dispose of the sold item until the price is paid, to avoid enforcement procedures.

An example of a legitimate interest for the transferee is when a property is gifted to a needy person who might dispose of it in a way that harms himself, so it is stipulated that he should not dispose of it until he reaches a certain age to protect him from his own recklessness and extravagance.

An example of a legitimate interest for a third party is when a person gifts a property and stipulates that a part of its yield should go to another person, and stipulates that the donee should not dispose of it so that the yield owner is not harmed.

The second condition is that the duration of the condition prohibiting disposition should be reasonable, excluding two scenarios: the first scenario is when the prohibition is perpetual, and the second scenario is when the prohibition is temporary for an unreasonable duration that does not correspond to the interest intended to be protected by the stipulator.

The reason for this is that the condition prohibiting disposition is contrary to the default; as it strips the owner of some of the authorities granted to him by the system under ownership, which are essential elements of ownership that cannot be imagined without them; the deviation from this default is only for the interest intended to be protected by this condition, and it should not exceed this extent.

The reasonable duration varies according to circumstances and conditions, and a certain duration may be reasonable in one case and not in another. The system has left its determination to the discretion of the judiciary; and restricting the duration to the lifetime of the disposer, the transferee, or a third party may be reasonable in some cases; such as when the seller retains the right of usufruct for the duration of his life and stipulates that the buyer should not dispose of the house during this period, or when the owner gifts an asset to a person known for poor management and stipulates that he should not dispose of it during his lifetime; thus, the condition ends with his death and the asset passes to his heirs unencumbered by this condition.

The third paragraph of the article clarifies that if the condition prohibiting disposition does not meet the two previous conditions, then this condition is void; even if the stipulator did not intend to protect a legitimate interest for himself, the transferee, or a third party; the condition is void, and if the condition is for an unreasonable duration, the condition is void for the duration that exceeds the reasonable period; because the voidance here is divisible.

As for the effect of the voidance of the entire condition or part of it on the disposition containing this condition; the default is that the voidance of the condition does not affect that disposition; the disposition remains valid with the voidance of the condition or part of it; unless the stipulator proves that he would not have agreed to the contract without that condition or the part that was voided; he may request the annulment of the contract according to what is stipulated in paragraph (2) of article (74).

Related To

Article 617

1. The owner may not include in a disposition, whether by a contract or a will, a condition prohibiting the assignee from disposing of the property, unless such condition is stipulated for a reasonable period and is intended to protect a legitimate interest of the assignor, the assignee, or a third party.

2. If no period is specified for the prohibition of disposition, the court may determine such period according to custom, the nature of the dealing, and the purpose of the disposition.

3. Any condition prohibiting an assignee from disposition shall be deemed null and void, unless it meets the provisions of paragraph (1) of this Article.