Ask Gulf News: Can a company ask for car payments early after insolvency?

Question: I purchased a car from a company under an agreement that payment of the instalments will commence 6 months after the date of purchase. One month after the purchase, I was adjudged insolvent. The company was informed of the insolvency and subsequently demanded payment of the instalments before the expiry of the agreed 6-month. Does the company have the right to do so? Please advise

Answer: As a general rule, when an obligation is subject to a future term, the obligation is established, its enforcement is deferred until the agreed-upon term becomes due and the seller is required to wait until the expiry of the agreed period before demanding payment. This is stipulated in Article 361 of the Civil Transactions Law, “An obligation deferred to a term shall not be effective until the term falls due. The creditor may, before the term falls due, take such measures as are necessary to preserve their right, including requesting security if they fear the debtor's insolvency and base this on a reasonable cause.”

However, the debtor’s right to the term shall lapse If he is adjudged bankrupt, insolvent, or placed under interdiction, or failed to provide the security, or when the agreed security is diminished. Article 366 provides (The debtor’s right to the term shall lapse in the following cases: 1. If they are adjudged bankrupt, insolvent, or placed under interdiction. 2. If they fail to provide the agreed security for the debt. 3. If the agreed security for the debt is diminished by an act attributable thereto or by a cause beyond their control, unless they promptly complete it.)  

So, the company would be entitled to demand payment before the expiry of the agreed 6-month period.