Promissory Note in Saudi Arabia

A Promissory Note (Sando L’Amr) in Saudi Arabia is one of the most widely used and recognized commercial documents in the Kingdom. Many seek to understand how to issue or execute it due to its ease of use and the fewer problems associated with it. However, if the debtor does not repay the debt, the matter may end up in court, as the holder of the promissory note has the right to take legal action to claim their right and enforce the note according to Saudi law.

Promissory Note in Saudi Arabia

A promissory note is a commercial document recognized under Saudi law and widely used, especially in financial transactions. However, its execution is subject to specific conditions, and failure to meet these conditions renders the note invalid.

In practice, a creditor lends money to a debtor, agreeing on a repayment date, and a formal document is issued to prove the debt. If the debtor refuses to repay, the creditor has the right to file a legal claim to retrieve the owed amount.

Conditions for a Valid Promissory Note in Saudi Arabia

Under Saudi financial regulations, the promissory note is a key element and must meet certain criteria to be legally valid:

• The document must explicitly state that it is a “Promissory Note.”
• The specified amount must be in Saudi Riyals.
• All relevant details, such as the date and place of issuance, as well as the debtor’s name, nationality, address, and signature, must be included.
• A commitment to repay without any objections or protest fees should be written.

The promissory note is a crucial commercial document under Saudi law, and it is vital to carefully follow the conditions for its issuance. Failure to comply with these conditions may result in the invalidation of the note.

Reasons for Invalidating a Promissory Note in Saudi Arabia

Several factors can lead to the invalidation of a promissory note, and it is essential to avoid these when issuing one to ensure its legality:

• Expiry of the three-year statute of limitations for commercial documents from the date of maturity.
• Failure to file a claim within one year from the date of objection.
• In cases where the note includes a condition of recourse without protest, claims against endorsers expire after six months.
• If the issuer of the note is under 18 years of age.
• If the note was issued under duress or coercion.
• Failing to specify the debt amount in both numerals and words.
• Failing to state the reason for issuing the note.

Penalties for a Promissory Note in Saudi Arabia

Failure to fulfill the promissory note can result in severe penalties, as Saudi law aims to compel the debtor to meet their obligations. Legal measures that may be imposed include:

• Freezing the debtor’s bank accounts.
• Issuing a travel ban.
• Imposing imprisonment, with the duration determined by the court according to commercial law.
• Restricting the debtor’s dealings with government entities.

If the issuer falsely claims that the note is forged, and this claim is disproven, they could face imprisonment or a hefty fine for the false claim. However, if the note is proven to be forged, it will be invalidated.

Objection to the Execution of a Promissory Note in Saudi Arabia

Saudi law grants the right to object to the execution of a promissory note, provided there are valid grounds for doing so. The objection must be filed within the appropriate court, depending on whether the contract is commercial or civil. Failure to file an objection within the specified time will result in the rejection of the objection.

Seeking assistance from an expert lawyer in financial claims is recommended to ensure proper objection procedures are followed, as they can effectively represent their client before the relevant authorities.