Collusion / Simulation
"Is a simulated contract valid?"
Quick Answer
Simulation (Muvazaa) occurs when parties agree to create a false appearance of a legal transaction to deceive third parties, while secretly agreeing it will have no legal effect between them.
Scope and Legal Distinctions
A simulated transaction conceals the parties' true intention. The apparent transaction and any hidden agreement must be analysed separately, including mandatory form for the hidden arrangement.
What to Check in Practice
Preserve payment flows, possession, correspondence and the parties' relationship; third-party reliance and evidence rules can affect the remedy.
Sources & Authorities
Statutory framework and official guidance for this definition.
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