The Debt Settlement Contract is a crucial legal instrument in Saudi Arabia used when parties wish to formalize an agreement to settle an outstanding debt obligation. This document is particularly important in the Saudi Arabian context as it must balance modern commercial practices with Islamic Sharia principles, especially regarding the treatment of interest and financial obligations. The contract is commonly used in situations where a debtor acknowledges a debt and agrees to a structured settlement plan, whether through a lump sum payment at a discount or installment payments. It provides legal protection for both creditor and debtor by clearly documenting the agreed terms, payment schedule, and consequences of default. The document must comply with Saudi Arabian civil law, the regulations of the Saudi Arabian Monetary Authority (SAMA), and Islamic financial principles, making it a unique hybrid of religious and civil law requirements. It's particularly valuable in commercial disputes, financial restructuring, and debt resolution scenarios where formal documentation of the settlement terms is essential for legal certainty and enforcement.
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1. Parties: Identification of the creditor and debtor, including full legal names, addresses, and official registration numbers if applicable
2. Background: Context of the original debt, including its nature, origin, and current outstanding amount
3. Definitions: Key terms used throughout the agreement, including defined terms for Original Debt, Settlement Amount, Payment Date, etc.
4. Debt Acknowledgment: Formal acknowledgment of the original debt amount by the debtor and confirmation of its validity
5. Settlement Terms: Details of the agreed settlement amount and any discount or waiver of the original debt amount
6. Payment Terms: Specific payment obligations, including payment schedule, method of payment, and currency
7. Default Provisions: Consequences of missing payments or breaching the agreement terms
8. Representations and Warranties: Statements by both parties regarding their capacity and authority to enter into the agreement
9. Governing Law and Jurisdiction: Confirmation of Saudi law application and Sharia compliance
10. Notices: Process for formal communications between parties
11. Execution: Signature blocks and execution requirements
1. Guarantees: Include when there is a third-party guarantor for the settlement payments
2. Collateral: Include when specific assets are pledged as security for the settlement
3. Confidentiality: Include when parties wish to keep the settlement terms private
4. Early Payment Provisions: Include when there are specific terms for early settlement of the debt
5. Force Majeure: Include when parties want to address circumstances that might prevent payment fulfillment
6. Assignment: Include when either party may need to transfer rights under the agreement
7. Zakat Considerations: Include when the settlement needs to address Islamic tax implications
1. Schedule 1 - Payment Schedule: Detailed breakdown of payment dates, amounts, and methods
2. Schedule 2 - Original Debt Documentation: Copies of original debt agreements or documentation
3. Schedule 3 - Collateral Details: Description and documentation of any collateral provided
4. Appendix A - Calculation of Settlement Amount: Detailed calculation showing how the settlement amount was determined
5. Appendix B - Required Notices and Forms: Templates for any required notices or forms under Saudi law
6. Appendix C - Sharia Compliance Certificate: Certificate from qualified scholar confirming agreement's compliance with Islamic law
Relevant legal definitions
Clauses
Relevant Industries
Banking & Financial Services
Islamic Finance
Commercial & Retail
Real Estate
Construction
Manufacturing
Professional Services
Healthcare
Trading & Import/Export
Small and Medium Enterprises
Relevant Teams
Legal
Finance
Credit Control
Risk Management
Treasury
Compliance
Accounts Receivable
Collections
Islamic Banking
Corporate Affairs
Debt Recovery
Relevant Roles
Chief Financial Officer
Finance Manager
Credit Controller
Legal Counsel
Compliance Officer
Debt Recovery Specialist
Risk Manager
Treasury Manager
Accounts Receivable Manager
Contracts Manager
Islamic Finance Specialist
Collection Manager
Financial Analyst
Corporate Lawyer
Business Development Manager
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