Iranian High Court Breakthrough on Compensation in Cases Wherein It is Established that the Object Sold Belongs to a Third Party

Nouraei & M. Mostafavi Law Offices – 30 June 2021-Tehran- According to the decision of the General Board of the High Court of Iran, adopted at its session of 1/4/1400 (23 June 2021), in cases wherein the object sold turns out to belong to a third party and the purchaser has been ignorant of the matter, his / her losses including the devaluation of the price of the transaction, must be indemnified and compensated, the Fars News Agency reported last week.

The High Court has based its ruling on Articles 390 and 391 of the Civil Code and its own former decision No. 733 on compensation to be observed for devaluation of the price paid when the object sold turns out to belong to a third party and the seller should return the price plus losses.

For decades the devaluation of the price was not considered a loss and the courts would sentence the buyer to return only the exact amount of the price despite the fall in value of the local Rial currency in the course of both the transaction and litigation. Hence, the ruling of 23 June 2021 of the High Court has put an end to this dilemma and it is stated in the decision that the experts by assessing the market value of similar objects would calculate the devaluation of the price of the movable or immovable object sold. For instance, if the object’s value was ten billion Rials at the time of transaction and it was paid by the purchaser to the buyer, the experts appointed by the court may opt that the current value of that object is presently 30 billion Rials due to inflation and the same amount should be now paid to the purchaser.

The decisions of the High Court are obligatory for all the courts of justice in Iran.

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