Construction Promissory Note Template for Saudi Arabia

A Construction Promissory Note is a critical financial instrument in Saudi Arabian construction projects that creates a legally binding obligation for payment between construction parties. Under Saudi Commercial Papers Law (Royal Decree No. M/37), this document serves as an unconditional promise to pay a specified amount, providing essential security for construction transactions while ensuring compliance with Sharia principles that prohibit interest-bearing arrangements.

When do you need this document?

You need a Construction Promissory Note when securing advance payments from project owners, guaranteeing performance obligations as a construction company, or establishing payment schedules for large construction works. This document is essential when banks require additional security for construction financing, when sub-contractors need payment guarantees from main contractors, or when project developers demand performance bonds from construction companies. Government construction projects under the Government Tenders and Procurement Law (Royal Decree No. M/128) frequently require these instruments as part of bid security or contract performance guarantees.

Key legal considerations

Your Construction Promissory Note must contain an unconditional promise to pay using specific mandatory wording required under Saudi law, with payment amounts stated in both numbers and words. The document must include full legal names, addresses, and commercial registration numbers of all parties, along with detailed project references to establish the underlying construction obligation. Under the Anti-Commercial Fraud Law (Royal Decree No. M/19), all information must be accurate and verifiable to prevent fraudulent practices. The note should specify whether it is payable on demand or on a fixed date, and must avoid any interest provisions to comply with Sharia principles governing Islamic finance.

Legal requirements in Saudi Arabia

Saudi law requires Construction Promissory Notes to be written in Arabic as the primary language, though English translations may be attached for clarity. The document must be signed by the maker (construction company) and witnessed according to Saudi Civil Transaction Law requirements for commercial documents. Under the Banking Control Law (Royal Decree No. M/5), if the note involves banking institutions, additional regulatory compliance may be required for negotiation or discounting. The note must clearly identify itself as a "Promissory Note" and include the date of issuance, as these elements are mandatory for legal validity and enforcement through Saudi courts and the banking system.