Promissory Note in Saudi Arabia: What It Is and the Correct Format

A promissory note is a written, signed promise by one person (the maker) to pay a fixed sum of money to another person (the payee) or to their order, on a set date or on demand. In Saudi Arabia it is governed by the Commercial Papers Law, which lists the items the note must contain. If an essential item is missing, the paper may lose its status as a promissory note and become an ordinary acknowledgment of debt, which is much harder to collect on. This guide explains what the note is, what it must say, how to lay it out, and how the electronic version issued on the Nafith platform works.

What is a promissory note?

The promissory note is one of the three commercial papers recognized in Saudi law, alongside the bill of exchange and the cheque. The main difference between them is the number of parties:

• Promissory note: two parties. The maker promises to pay the payee directly.
• Bill of exchange: three parties. The drawer orders another person, the drawee, to pay the payee.
• Cheque: drawn on a bank and payable on sight.

Businesses use promissory notes to document deferred payments: a buyer paying for goods in installments, a tenant committing to future rent, a partner repaying a loan, or a customer settling an outstanding balance. Because the note is payable to the payee’s order, the payee can usually transfer it to someone else by endorsement, which makes it a practical tool for trade credit.

The elements a promissory note must contain

The Commercial Papers Law requires the note to include the following items:

1. The words “promissory note” written in the body of the document, in the language the note is written in. Put the term in the text itself, not only as a heading.
2. An unconditional promise to pay a stated amount. The promise must not depend on any event, such as delivery of goods or completion of a project.
3. The maturity date, meaning when payment is due.
4. The place of payment, where the amount is to be paid.
5. The name of the payee, the person to whom, or to whose order, payment is to be made.
6. The date and place of issue.
7. The signature of the maker, the person who issues the note and promises to pay.

The law fills some gaps on its own. A note with no maturity date is treated as payable on sight. If the place of payment is missing, the place of issue is treated as the place of payment and as the maker’s domicile. If the place of issue is missing, the note is treated as issued at the place written next to the maker’s name. Other omissions, such as a missing signature, a missing payee or a conditional promise, can stop the document from counting as a promissory note at all.

Sample layout of a promissory note

There is no single mandatory paper form, but a clear note usually follows this order. Replace each item in brackets with the actual details:

1. Title: Promissory Note.
2. Place of issue: [city].
3. Date of issue: [day, month and year].
4. Amount in figures: [amount and currency].
5. Amount in words: [amount written out, then the currency].
6. Maturity date: [a specific date, or “on sight”].
7. The promise: “I, [full name of the maker], identity number [number], undertake to pay unconditionally, under this promissory note, to the order of [name of the payee], identity or commercial registration number [number], the amount stated above on the maturity date.”
8. Place of payment: [city and address].
9. Maker’s details: [name, identity number, address, mobile number].
10. Maker’s signature: [signature].
11. Guarantor, if any: [name, identity number, signature, and a statement that the guarantor guarantees payment by the maker].

The guarantor line is optional. The law allows a third party to guarantee payment of the note on the note itself, which gives the payee a second person to claim from. Keep the amount in figures and the amount in words identical; where they differ, the amount written in words is the one relied on.

Electronic promissory notes on the Nafith platform

Many individuals and businesses now issue promissory notes electronically through the Nafith platform instead of on paper. The note’s details, including the amount, the maturity and the parties, are entered on the platform, and the maker reviews them and signs electronically after verifying their identity. Because the note is created, signed and kept electronically, the usual problems of paper notes, such as lost originals, unclear handwriting or arguments over whether a signature is genuine, are largely avoided.

Practical points:

• Review every detail before signing, especially the amount and the maturity date, because a signed electronic note binds the maker just as a signed paper note does.
• Check on the platform itself which services are available to individuals and to businesses, and any fees that apply. The platform is the reference for both.
• Document every payment made against the note, and ask for its status to be updated once it is fully paid.

Why a promissory note is enforceable

The main reason creditors prefer a promissory note to an ordinary written acknowledgment of debt is enforcement. Under the Enforcement Law, commercial papers, including promissory notes, are among the enforceable instruments that can be presented directly to the enforcement court. In practice, the holder of a valid note that has fallen due and has not been paid can apply for enforcement without first filing a lawsuit to prove the debt and waiting for a judgment.

An electronic note issued on Nafith is an enforceable instrument just like a signed paper note, and because its details and signature are already verified in digital form, preparing the enforcement request is simpler. The enforcement court notifies the debtor and, if payment is not made, can take the measures set out in the Enforcement Law.

Enforcement is not automatic in every case. The note must meet the legal requirements and must have fallen due, and the debtor can still raise certain objections before the enforcement judge, for example by proving that the debt was paid. Where there is a dispute about the underlying deal, take advice from a licensed lawyer.

Common mistakes

• Making the promise conditional, for example “I will pay once the goods are delivered.” A condition can take the document outside the definition of a promissory note.
• Leaving the words “promissory note” out of the body of the text, or using another term such as receipt or acknowledgment.
• Different amounts in figures and in words, or corrections and crossings-out over the amount.
• Signing a blank or incomplete note. Empty fields can be filled in later by someone else. Do not sign any note until every field is complete.
• A signature by someone with no authority to sign for the company, when the maker is a business.
• Confusing a promissory note with a receipt voucher. A receipt voucher records that money was received; it is not a promise to pay and does not give the same route to enforcement.
• Keeping no record of partial payments. Each payment against the note should be documented in writing and signed by the payee.

Frequently asked questions

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