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Guarantor Letter for Saudi Arabia

Guarantor Letter Template for Saudi Arabia

A Guarantor Letter under Saudi Arabian law is a formal document where one party (the guarantor) commits to fulfilling specific financial or performance obligations of another party (the primary debtor) to a third party (the beneficiary). The document must comply with both Saudi civil law and Sharia principles, particularly regarding the clarity of obligations and the absence of prohibited elements such as interest (riba). The letter typically specifies the scope of the guarantee, payment terms, duration, and enforcement mechanisms, while ensuring all elements are compliant with local regulations and Islamic finance principles.

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What is a Guarantor Letter?

The Guarantor Letter is a fundamental document in Saudi Arabian commercial and financial transactions, used when one party needs to provide financial security for another's obligations. This document type is particularly important in the Saudi market where personal and corporate guarantees play a crucial role in business relationships. The letter must be carefully drafted to ensure compliance with both Saudi civil law and Sharia principles, which prohibit certain conventional banking practices such as interest (riba). A properly structured Guarantor Letter will clearly define the guarantee's scope, specify the maximum liability, outline the duration of the guarantee, and detail the conditions under which it can be called upon. It's commonly used in various contexts including project financing, commercial leases, supply contracts, and banking facilities.

What sections should be included in a Guarantor Letter?

1. Letter Header: Full legal names and addresses of the Guarantor and Beneficiary

2. Date: Date of the guarantee letter

3. Reference to Primary Obligation: Clear identification of the main debt or obligation being guaranteed

4. Guarantee Statement: Express statement of guarantee and its scope, including the maximum amount guaranteed

5. Duration of Guarantee: Clear specification of when the guarantee begins and ends

6. Payment Terms: Specific conditions and process for making payments under the guarantee

7. Governing Law Statement: Confirmation that Saudi law and Sharia principles govern the guarantee

8. Signature Block: Space for Guarantor's signature, with name and title

What sections are optional to include in a Guarantor Letter?

1. Multiple Guarantors Clause: Required when there is more than one guarantor, specifying joint and several liability

2. Demand Mechanics: Detailed process for making demands under the guarantee, used for complex arrangements

3. Islamic Finance Compliance: Specific statements ensuring compliance with Sharia principles, needed for certain financial institutions

4. Language Clause: Required when the letter is bilingual Arabic/English, specifying which version prevails

5. Corporate Authority: Required for corporate guarantors, confirming authority to issue the guarantee

What schedules should be included in a Guarantor Letter?

1. Schedule 1 - Primary Agreement Details: Copy or summary of the main agreement being guaranteed

2. Schedule 2 - Guaranteed Amount Calculation: If the guaranteed amount involves calculations or variations

3. Schedule 3 - Form of Demand: Standard template for making demands under the guarantee

4. Appendix A - Corporate Authorizations: Copies of relevant corporate approvals and authorizations

5. Appendix B - Supporting Documents: Any additional documents referenced in the guarantee

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 | Serial Founder & Legal AI Author

Jurisdiction

Saudi Arabia

Publisher

Genie AI

Document Type

Service Letter

Cost

Free to use
Relevant legal definitions




















Clauses




















Relevant Industries

Banking and Financial Services

Construction and Real Estate

Manufacturing

Trading and Commerce

Healthcare

Education

Telecommunications

Energy and Utilities

Transportation and Logistics

Professional Services

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Commercial Operations

Credit Control

Corporate Governance

Business Development

Islamic Banking

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Compliance Officer

Risk Manager

Treasury Manager

Commercial Director

Contract Manager

Company Secretary

Credit Manager

Business Development Manager

Financial Controller

Corporate Lawyer

Islamic Finance Specialist

Industries





Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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