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The Loan Assumption Agreement is a crucial document used when one party wishes to take over the loan obligations of another in Saudi Arabia. This agreement is commonly utilized in various scenarios, including corporate restructurings, property transfers, or business acquisitions where existing financing needs to be maintained but transferred to a new obligor. The document must carefully balance conventional banking practices with Islamic finance principles, particularly regarding the treatment of debt transfer (Hawalah) and interest (Riba). Every Loan Assumption Agreement must comply with Saudi Arabian law, including regulations from the Saudi Arabian Monetary Authority (SAMA) and Sharia requirements. The agreement typically includes detailed information about the original loan terms, the assuming party's creditworthiness, security arrangements, and specific conditions that must be met for the assumption to take effect. It's particularly important in real estate transactions and corporate restructurings where maintaining existing financing arrangements is preferred over establishing new loan agreements.

1. Parties: Identification of the Original Borrower, Assuming Party, and Original Lender

2. Background: Details of the original loan agreement and the context for the assumption

3. Definitions and Interpretation: Key terms used in the agreement, including Sharia-compliant financial terms

4. Assumption of Obligations: Core provisions detailing the transfer and assumption of loan obligations

5. Consideration: Details of any consideration paid for the assumption (structured in compliance with Sharia)

6. Effective Date and Conditions Precedent: Conditions that must be met before the assumption becomes effective

7. Representations and Warranties: Statements of fact and assurances from both the Original Borrower and Assuming Party

8. Original Borrower's Obligations: Ongoing responsibilities and release provisions for the original borrower

9. Assuming Party's Obligations: Detailed obligations and commitments of the party assuming the loan

10. Lender's Rights and Obligations: Confirmation of the lender's position and ongoing rights

11. Security Arrangements: Treatment of existing security and any new security requirements

12. Payments and Calculations: Payment mechanisms and calculation methods (Sharia-compliant)

13. Events of Default: Circumstances constituting default and consequential rights

14. Governing Law and Jurisdiction: Confirmation of Saudi law governance and jurisdiction

15. Notices: Communication procedures between parties

16. Counterparts: Execution formalities