Roman - Dutch Law is the foundation of the law of property, but it has been greatly amended by legislation and local custom.


In view of the provisions of Section 2 of the Prevention of Frauds Ordinance (Chapter 84 of the Legislative Enactments of Sri Lanka – Revised 1980) the following classes of contracts are of no force or avail in law unless in writing and signed in Sri Lanka in the presence of a licensed notary public and two or more witnesses and duly attested.

(a)   Any sale purchase transfer assignment or mortgage of land or other immovable property;

(b)   Any promise bargain contract or agreement for effecting any such object and for establishing any security interest or encumbrance affecting the land or other immovable property;

(c)   Any contract or agreement for the future sale or purchase of land or other immovable property.


The restriction on ownership of agricultural lands brought in by the Land Reform Law still continues. An individual or company can own only 50 acres of an agricultural land of which the paddy lands should not exceed 25 acres in extent.


If a foreigner intends to purchase an immovable property he will have to pay a 100% tax and the purpose of this tax is obviously to discourage foreigners acquiring properties in Sri Lanka. However a joint venture Company incorporated in Sri Lanka (with foreign participation) is not liable to pay that tax. Furthermore the condominium units of residential or non-residential accommodation on or above the 6th floor of a registered condominium apartment constructed with the approval of the UDA are exempted from such 100% tax.


The general law of contract is the Roman Dutch Law except in Commercial matters. The Commercial Law of Sri Lanka is the English Law or Statutes based on the English Statutes. Contracts entered into by persons subject to special laws such as the Kandyan Law, Thesavalamai and the Muslim Law, are governed by the special system applicable to the parties to the contract.

As a leading jurist of Sri Lanka once said, there are many pitfalls in defining a contract. However it may be defined as a promise which will be enforced or recognised in a Court of law. A contract must be distinguished from other obligations such as those arising out of delict quasi-contracts and trusts. To constitute a valid contract the following elements should be present:-

(a)        There should be two parties - the promisor and the promisee;

(b)        Agreement between the parties;

(c)        Actual or presumed intention to create a legal obligation;

(d)        Due observance of the prescribed forms or modes of agreement, if any;

(e)        Consideration or causa as the case may be;

(f)        Capacity of parties to contract (this relates to whether they are minors or suffer from disabilities).

(g)        Reality of consent (viz. the agreement should not be impeachable on the ground of fraud, fear, misrepresentation, undue influence or such other reason).


All Public contracts (with Government Departments, establishments, Corporations, undertakings or Local Authorities) over Rs.5,000,000/- fall under the General Contracts Act No.3 of 1987. This Act is effective from 2nd June 1988. All tenderers, agents and sub-agents representatives or nominated persons should register under the provisions of the General Contracts Act. This law is administered by the Registrar of Companies.


The Unfair Contract Terms Act 26 of 1997 imposes limits on the extent to which civil liability for breach of Contract or for negligence or other breach of Duty can be avoided by Means of Contract terms and otherwise.

The provisions of Sections 3, 4, 5 and 6 applies only to business liability and the references to Liability in those sections shall be construed accordingly.

The following Contracts are exempted from application of this law

a)         Any contract of Insurance

b)         Any contract so far as it relates to the creation or transfer of an interest in land or to the termination of any such interest.

c)         Any contract so far so it relates to the creation or transfer of a right or interest in any patent, trade mark, industrial design or other intellectual property, or to the termination of any such right or interest.

d)         Any contract so far as it relates –

i)          to the formation or dissolution of a Company or partnership or

ii)         to the constitution or the rights or obligations of its partners.

e)         Any contract so far as it relates to the creation or transfers or of any right or interest in securities.