Conditional Gift

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Conditional Gift

When a person transfers property to another person as a gift, without consideration, a legal act occurs.

The Civil Code governs this legal act and various situations arising from it under the contract of gift. Terms such as compensatory or conditional gift and non-compensatory gift are used to describe different types of gift contracts.

How to Prepare a Conditional Gift Instrument

Where a person transfers property to another gratuitously, a gift contract is formed. In this contract, the transferor is referred to as the donor, and the person who receives ownership of the property free of charge is referred to as the donee.

The gifted property is commonly described as the subject matter of the gift.

The property may be a specific tangible asset, such as a vehicle, real estate, or similar, or it may be a claim. This is the case where a person gifts a claim they have against someone, either to the debtor or to a third party.

Requirement of Donor Ownership

In a gift contract, the subject matter must belong to the donor and be under the donor’s ownership. In other words, gifting property that belongs to another person is not valid without that person’s permission.

Legal Capacity of the Donor

A condition for the formation of a gift contract is the donor’s legal capacity, meaning the donor must have mental capacity, have reached puberty, and be legally mature. For example, the donor must not be a minor or mentally incompetent, because a gift is gratuitous and may be detrimental to the donor.

It should also be noted that a guardian or trustee may not gift the property of a minor or mentally incompetent person unless the gift is compensatory and the interests of the incapacitated person are observed, or the gifted item is insignificant and has a moral or educational character for the incapacitated person.

Because acceptance of a gift is beneficial, there is generally no restriction on the donee.

Although a gift is ordinarily gratuitous, it is possible to include a condition of compensation. In this type of gift, the donor may stipulate that the donee, in exchange for the gifted property, transfer property to the donor or perform a specific act. In that case, the gift becomes a compensatory gift. Accordingly, a conditional gift may be treated as a compensatory gift.

The condition stated in a gift contract must not be contrary to law or Sharia, and it must not conflict with the essential nature of the gift, including delivery or possession of the gifted property by the donee. For example, a person may gift real estate to another on the condition that the benefits of the property remain with the donor until the donor’s death.

Conditional Gift Subject to Waiver of Inheritance

In this form of gift, the donor transfers property to one of their heirs before death, on the condition that the recipient waives their inheritance share after the donor’s death and does not take steps to acquire property as an inheritance share. For example, a husband may gift property to his spouse on the condition that the spouse waives inheritance rights after his death.

Revocation of Gift

Because a gift contract is revocable, the parties may terminate it at any time without the need to provide a specific reason. Since revocation effectively means terminating the gift contract, the donor may reclaim the gifted property. For example, where the donee fails to comply with a condition in a conditional gift, revocation may be possible.

However, the Civil Code does not permit revocation in certain circumstances, including the following:

Where the gift is compensatory, and the compensation condition has been fulfilled.
Where the donee is the donor’s father, mother, or children.
Where the donee no longer owns the gifted property and has transferred the donee’s ownership.
Where it is established that the gifted property belongs to another person.
Where the gifted property has been altered.
Where the gifted property has been destroyed or lost.
Where the donor has waived the right of revocation at the time of or after concluding the contract.
Where the donor or the donee has died.
Where the gift is in the form of forgiving a debt owed by the debtor.

Frequently Asked Questions About Conditional Gifts

What is a conditional gift?

A conditional gift is a type of gift contract in which the donor transfers property to the donee subject to a specific condition. The condition may require the donee to perform an act or comply with a limitation. In such cases the gift may be treated as a compensatory gift.

What requirements apply to preparing a conditional gift?

The gifted property must belong to the donor. The donor must have legal capacity, including mental capacity, puberty, and legal maturity. Any condition included must not be contrary to law or Sharia and must not conflict with the essential nature of the gift contract.

What is the role of the donor’s legal capacity in a conditional gift?

The donor’s legal capacity is required for a valid gift. The donor must not be a minor or mentally incompetent. Gifts by a guardian or trustee are only possible in limited situations and generally require that the gift be compensatory or clearly beneficial to the incapacitated person.

How does a conditional gift based on waiver of inheritance work?

In this type of gift, the donor transfers property to an heir before death on the condition that the heir waives their inheritance share after the donor’s death and does not seek to claim property as inheritance.

Is revocation of a gift possible?

Because a gift contract is revocable, the donor may revoke it in certain cases, particularly where the condition in a conditional gift has not been satisfied. However, the Civil Code restricts revocation in several circumstances, including fulfillment of compensation, close family relationships, or the death of either party.

In which cases is revocation of a gift not permitted?

Revocation is not permitted in cases such as where the gift is compensatory and the compensation condition has been fulfilled, where the donee is the donor’s parent or child, where the gifted property has left the donee’s ownership, where the property has been altered or destroyed, where the right of revocation has been waived, or where the donor or donee has died.