Judicial principles and studies
Sham Contracts, Their Proof, and Partners' Testimony
A concise summary of the division between absolute and relative sham contracts, limits on proof methods, the admissibility of partners' testimony in an LLC, and the option to raise sham as a defense or separate claim.
Updated: 10 September 2026
Prepared and reviewed by: Ashraf Al-Khawaja
Subject
- Sham contracts are divided into two types: absolute sham and relative sham. Absolute sham targets the contract itself and its real existence, while relative sham differs in the permitted means of proof. - Absolute sham may be proved by any method of proof and is not limited to documentary evidence; proof may extend beyond the apparent parties to those who executed the sham contract and concealed their true intent. - Relative sham may be proved only by written evidence (ورقة الضد). - Under the stated principle in Article (80) of the Civil Code, testimony that would personally benefit or exonerate the witness is inadmissible. - When the defendant is a limited liability company, partners' testimony is not covered by the prohibition in Article (80) because they are not parties to the suit; their testimony is therefore admissible evidence but remains subject to the trial court's assessment. - An allegation of sham can be raised either as an independent suit or as a plea/defense in an existing proceeding; the law does not bar raising it as a defense nor require a counterclaim or separate action for it to be considered.
Summary
- Absolute sham: provable by any means; proof can reach those who drafted and concealed the true intent. - Relative sham: provable only by written evidence (ورقة الضد). - Testimony that personally benefits or harms the witness is excluded under Article (80). - Partners in an LLC: their testimony is admissible and its weight is for the court to determine. - Procedurally, sham may be pleaded in defense or pursued in a separate action; pleading it as a defense is permissible without filing a separate claim.
Practical significance
- Practitioners should distinguish the two sham categories to select appropriate proof methods: employ diverse proof for absolute sham and rely on written counter-documents for relative sham. - In disputes involving limited liability companies, expect partners' testimony to be admissible but evaluated by the court on its merits. - Parties may choose to raise sham as a procedural defense in pending litigation or bring a standalone claim depending on strategy. Note: This is an educational summary only, not a judicial text or legal advice.
Sources and references
Verify the official text and latest amendments before relying on this material professionally.