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Promissory Note Settlement Agreement for United Arab Emirates

Promissory Note Settlement Agreement Template for United Arab Emirates

A legal document governed by UAE law that formalizes an agreement between parties to settle obligations arising from one or more promissory notes. The agreement is structured under the UAE Commercial Transactions Law (Federal Law No. 18 of 1993) and Civil Transactions Law, establishing modified payment terms, settlement conditions, and consequences of default. It typically includes detailed payment schedules, any discount on the original amount, security arrangements, and specific enforcement provisions aligned with UAE legal requirements for both promissory notes and settlement agreements.

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What is a Promissory Note Settlement Agreement?

The Promissory Note Settlement Agreement is a crucial document used in the United Arab Emirates when parties wish to restructure or settle obligations arising from existing promissory notes. It becomes necessary when the original payment terms need modification, often due to financial constraints or business restructuring. The agreement combines elements of UAE Commercial Transactions Law governing promissory notes with settlement principles under the Civil Code, providing a legally enforceable framework for revised payment terms. Typically used in commercial and financial transactions, it offers protection to both creditors and debtors by clearly documenting the settlement terms, payment schedule, security arrangements, and consequences of default. The document must comply with UAE federal laws and may require registration or notarization depending on the settlement amount and parties involved.

What sections should be included in a Promissory Note Settlement Agreement?

1. Parties: Identification of the parties, including the promissory note issuer (debtor) and holder (creditor), with full legal names and addresses

2. Background: Details of the original promissory note(s), outstanding amounts, and circumstances leading to the settlement

3. Definitions: Key terms used in the agreement, including 'Promissory Note', 'Settlement Amount', 'Payment Schedule', and 'Default'

4. Acknowledgment of Debt: Debtor's formal acknowledgment of the original debt amount and validity of the promissory note(s)

5. Settlement Terms: Agreed settlement amount, payment structure, and any discount or consideration for the settlement

6. Payment Terms: Detailed payment obligations, including dates, amounts, and method of payment

7. Security and Guarantees: Any security arrangements or guarantees maintained or newly provided for the settlement

8. Default Provisions: Consequences of default, including reversion to original debt amount and enforcement rights

9. Representations and Warranties: Standard representations about capacity, authority, and binding nature of obligations

10. Governing Law and Jurisdiction: Specification of UAE law as governing law and relevant courts' jurisdiction

What sections are optional to include in a Promissory Note Settlement Agreement?

1. Release Provisions: Used when parties agree to mutual releases upon completion of settlement payments

2. Confidentiality: Include when parties wish to keep the settlement terms confidential

3. Tax Provisions: Required when settlement has tax implications for either party

4. Assignment: Include when transfer rights need to be restricted or permitted

5. Force Majeure: Include when longer-term payment arrangements necessitate force majeure protection

6. Dispute Resolution: Alternative dispute resolution mechanisms if parties prefer arbitration or mediation

7. Acceleration Clause: Include when immediate payment of all installments is desired upon specific trigger events

What schedules should be included in a Promissory Note Settlement Agreement?

1. Schedule 1 - Original Promissory Note(s): Copies of the original promissory note(s) being settled

2. Schedule 2 - Payment Schedule: Detailed installment schedule with dates and amounts

3. Schedule 3 - Security Documents: Details of any security or guarantee documents related to the settlement

4. Schedule 4 - Settlement Calculation: Breakdown of the settlement amount calculation, including any discounts

5. Appendix A - Form of Release: Template for the release document to be executed upon completion

6. Appendix B - Payment Instructions: Detailed banking or payment instructions for settlement payments

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use

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