Side Agreement Template for Saudi Arabia
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What is a Side Agreement?
A Side Agreement is commonly used in Saudi Arabian business transactions when parties need to modify or supplement terms of a main agreement without altering the original document. This document type is particularly relevant when dealing with sensitive commercial terms, regulatory requirements, or specific arrangements that warrant separate documentation. The Side Agreement must comply with Saudi Arabian law, including Shariah principles and commercial regulations, and typically includes provisions regarding the relationship to the main agreement, additional or modified terms, and specific arrangements between the parties. It's especially useful in complex commercial transactions where flexibility is needed or where certain terms need to be kept confidential or separate from the main agreement for commercial or regulatory reasons. The document must be carefully drafted to ensure enforceability within the Saudi legal framework while maintaining transparency and proper documentation of the parties' additional agreements.
Frequently Asked Questions
Is a Side Agreement legally binding in Saudi Arabia?
Yes, a Side Agreement is legally binding in Saudi Arabia when it complies with Sharia principles and the Commercial Courts Law 2020. The agreement must be properly executed by all parties and cannot contradict Islamic law or the original contract's fundamental terms. Saudi commercial courts recognize these supplemental agreements as enforceable contracts.
Can a Side Agreement contradict the original contract under Saudi law?
No, a Side Agreement cannot fundamentally contradict or void the original contract under Saudi Arabian law. It can only modify, clarify, or add supplemental terms that are consistent with the main agreement and Sharia principles. Any conflicting provisions may render the Side Agreement unenforceable in Saudi commercial courts.
How long does it take to prepare a Side Agreement in Saudi Arabia?
Preparing a Side Agreement in Saudi Arabia typically takes 5-10 business days for standard modifications. Complex arrangements involving regulatory compliance or sensitive commercial terms may require 2-3 weeks. The timeline includes legal review for Sharia compliance and alignment with the Commercial Courts Law 2020.
Side Agreement vs Amendment - which should I use in Saudi Arabia?
Use a Side Agreement for confidential or sensitive terms that parties prefer to keep separate from the main contract. Use an Amendment when making direct changes to existing contract clauses. Side Agreements are particularly useful in Saudi Arabia for addressing regulatory requirements or commercial arrangements that need discretion while maintaining Sharia compliance.
Must a Side Agreement be notarized in Saudi Arabia?
Notarization is not always required but is recommended for Side Agreements in Saudi Arabia, especially for significant commercial modifications. Certain types involving real estate or substantial financial commitments may require notarization under Saudi regulations. Proper authentication helps ensure enforceability in commercial courts.
Can I enforce a Side Agreement if the main contract is terminated in Saudi Arabia?
Generally, a Side Agreement becomes unenforceable if the main contract is terminated, unless it specifically provides for survival of certain terms. Under Saudi commercial law, supplemental agreements are typically dependent on the validity of the original contract. Include specific survival clauses if certain provisions should remain effective post-termination.
Common mistakes when drafting Side Agreements in Saudi Arabia?
Common mistakes include failing to ensure Sharia compliance, creating contradictions with the main contract, and inadequate Arabic translation requirements. Many parties also overlook proper execution formalities required under the Commercial Courts Law 2020 or fail to specify which provisions survive contract termination, leading to enforcement issues.
About the Side Agreement
A Side Agreement serves as a crucial legal instrument in Saudi Arabian commercial transactions, allowing you to supplement or modify existing contractual arrangements without disturbing the main agreement. Under Saudi law, these documents must comply with Sharia principles and the Commercial Courts Law 2020, ensuring your additional arrangements are legally binding and enforceable within the Kingdom's regulatory framework.
When do you need this document?
You need a Side Agreement when your business circumstances require modifications to an existing contract that cannot be easily incorporated into the main document. This commonly occurs in joint venture partnerships between Saudi and foreign companies when additional investment terms need separate documentation, or when government entities require specific compliance arrangements that must be kept confidential. Manufacturing contractors often use Side Agreements to address supply chain modifications without renegotiating entire contracts, while financial institutions may require separate agreements for collateral arrangements or guarantee modifications. Service providers frequently need Side Agreements when project scope changes significantly, and distributors may use them to address territory expansions or exclusive dealing arrangements that arise after the main distribution agreement is signed.
Key legal considerations
Your Side Agreement must explicitly reference the main contract and clearly define the relationship between both documents to avoid conflicts or ambiguities. Under Saudi law, you must ensure that any modifications comply with Sharia principles and do not contradict Islamic commercial law requirements. The agreement should include precise definitions that align with or supplement those in the main contract, and you must specify whether the Side Agreement takes precedence over conflicting terms in the original document. Payment terms, dispute resolution mechanisms, and termination clauses require careful consideration to ensure consistency with Saudi commercial practices. You should also address confidentiality requirements, particularly when dealing with sensitive commercial information or when one party is a government entity with specific disclosure obligations.
Legal requirements in Saudi Arabia
Under the Commercial Courts Law 2020 and Civil Transactions Law, your Side Agreement must meet specific formation requirements including clear offer and acceptance, lawful consideration, and parties with legal capacity to contract. The document must be drafted in Arabic or include certified Arabic translations for enforceability in Saudi courts. You must ensure compliance with the Anti-Commercial Fraud Law by maintaining transparency in all material terms and avoiding any misleading provisions. If your agreement involves foreign parties, you should consider requirements under Saudi Arabia's foreign investment regulations and any sector-specific licensing requirements. The agreement must also specify the governing law and jurisdiction for dispute resolution, typically referencing Saudi commercial courts for domestic enforcement. For agreements involving government entities, additional approvals or notifications may be required under applicable regulations.
GOVERNING LAW
Applicable law
This Side Agreement is drafted to comply with Saudi Arabia law. Key legislation includes:
Law of Commercial Courts 2020: Governs jurisdiction and procedures for commercial disputes, including those arising from side agreements
Commercial Courts Law Implementation Regulations: Provides detailed rules for commercial court proceedings and enforcement of commercial contracts
Anti-Commercial Fraud Law: Ensures transparency and prevents fraudulent practices in commercial transactions, including side agreements
Civil Transactions Law: Governs the formation, validity, and enforcement of contracts under Saudi law
Saudi Contract Law: Sets out requirements for valid contracts, including offer, acceptance, and consideration principles
Commercial Agencies Law: Relevant if the side agreement involves agency relationships or commercial representation
Anti-Concealment Law: Prevents hidden or undisclosed business arrangements that might violate Saudi regulations
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