Non Binding Partnership Agreement Template for Saudi Arabia
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What is a Non Binding Partnership Agreement?
The Non-Binding Partnership Agreement is a preliminary document used in Saudi Arabia during the exploratory phase of business relationships, where parties wish to document their intentions and proposed arrangements without creating legally binding obligations. It serves as a roadmap for potential collaboration while allowing flexibility for negotiations and due diligence. This document type is particularly valuable in the Saudi Arabian business context, where relationship-building and careful consideration of partnership terms are cultural priorities. It typically includes proposed structural elements such as governance frameworks, resource allocation, and operational procedures, while explicitly maintaining its non-binding nature. The agreement is commonly used when parties need to outline their shared vision and objectives before committing to a formal partnership, or when seeking internal approvals and stakeholder buy-in. It must be drafted in consideration of Saudi Arabian commercial laws and Shariah principles, making it suitable for both domestic and international business relationships.
About the Non Binding Partnership Agreement
A Non Binding Partnership Agreement is a preliminary legal document that allows you to explore business partnerships in Saudi Arabia without creating enforceable legal obligations. This document serves as a framework for potential collaboration, enabling you to outline your intentions, proposed terms, and shared objectives while maintaining the flexibility to negotiate and conduct due diligence before entering into a binding agreement.
When do you need this document?
You need this agreement when exploring potential business relationships with corporate entities, limited liability companies, joint stock companies, or government organizations in Saudi Arabia. It's particularly useful when you're in the preliminary stages of partnership discussions and want to document your mutual understanding without committing to legally binding terms. This document is essential when seeking internal approvals from stakeholders, conducting feasibility studies, or when cultural business practices require extensive relationship-building before formal commitments. Foreign companies entering the Saudi market often use this agreement to establish preliminary frameworks with local partners while navigating regulatory requirements.
Key legal considerations
Your agreement must explicitly state its non-binding nature to avoid unintended legal obligations under Saudi Arabian law. Include clear definitions of key terms, detailed identification of all parties with their full legal names and registration details, and specific statements about the exploratory nature of your discussions. Consider including provisions for confidentiality, intellectual property protection, and dispute resolution mechanisms even in this preliminary stage. Address how the agreement can be terminated and what happens to any shared information or preliminary work. Ensure that proposed governance frameworks, resource allocation methods, and operational procedures are clearly marked as preliminary proposals rather than binding commitments.
Legal requirements in Saudi Arabia
Your agreement must comply with the Companies Law 2015, which governs business relationships and partnership structures in Saudi Arabia. If any party is a foreign entity, consider the Foreign Investment Law requirements and ensure compliance with investment regulations. The document must respect Shariah principles and Saudi Arabian commercial practices. Include proper dispute resolution clauses referencing the Commercial Courts Law, even though the agreement is non-binding. Ensure all parties are properly identified with their Saudi commercial registration numbers where applicable. Consider Competition Law implications if your proposed partnership involves market conduct provisions or could affect competitive practices. The agreement should be drafted in both Arabic and English if foreign parties are involved, with clear provisions about which version prevails in case of discrepancies.
GOVERNING LAW
Applicable law
This Non Binding Partnership Agreement is drafted to comply with Saudi Arabia law. Key legislation includes:
Commercial Courts Law: Royal Decree No. M/93 of 2020, which governs commercial disputes and provides jurisdiction for business-related matters, relevant for understanding dispute resolution options.
Foreign Investment Law: Royal Decree No. M/1 of 2000, which regulates foreign investment in Saudi Arabia and may be relevant if any party is a foreign entity.
Competition Law: Royal Decree No. M/75 of 2019, which ensures fair competition and prevents monopolistic practices. Relevant for partnership terms and market conduct provisions.
Commercial Agency Law: Royal Decree No. M/11 of 1962 (as amended), which may be relevant if the partnership involves agency or distribution arrangements.
Islamic Shariah Principles: The fundamental source of law in Saudi Arabia, which provides principles for ethical business conduct and prohibited activities (gharar, riba, etc.).
Ministry of Commerce Regulations: Various implementing regulations and circulars that govern business practices and commercial activities in Saudi Arabia.
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