Before the Enforcement Court: The Debt Acknowledgment and Settlement Agreement With a Late-Paying Customer Under the New Enforcement Law

What is new: the Enforcement Law and its Implementing Regulation start together

The new Law replaces the previous Enforcement Law and its amendments, and repeals every provision that conflicts with it. The Minister of Justice was required to issue the Regulation within one hundred and eighty days of the Law's issue, to apply from the date the Law comes into force. In practice, an enforcement request your business files after the Law comes into force will be governed by the new rules on what counts as an executory instrument, on notice before enforcement, and on the period within which a request is accepted. These are the main procedural rules that matter to a business collecting a debt from a customer:

• Compulsory enforcement is permitted only under an executory instrument, to collect a specific right that is due, meaning the debt must be defined and its payment date must have arrived.
• An enforcement request under an executory instrument is not accepted if more than ten years have passed since its due date, without prejudice to other relevant legal provisions. For a debt paid in installments, the period runs for each installment separately from its own due date.
• The Regulation sets the cases in which the creditor must notify the debtor to pay before filing the enforcement request, including where the debtor is a private legal person such as a company.
• If the parties to enforcement agree to amend the obligations in the executory instrument, their agreement is notarized under the Notarization Law.

Why notarizing the acknowledgment and settlement now matters more

The previous Law counted among executory instruments ordinary papers whose content is acknowledged as due, in whole or in part. The list of executory instruments in the new Law does not include that item. Instead it lists contracts and acknowledgments notarized under the Notarization Law, and settlement agreements and reconciliation documents notarized under the Notarization Law or issued by bodies legally authorized to do so, alongside court judgments and orders, arbitral awards, cheques, and bills of exchange and promissory notes when registered on the national electronic platforms.

The practical message for a business owner is clear. An acknowledgment the customer signs on an ordinary paper remains important written evidence of the debt, but the clearest route to the Enforcement Court under the new Law runs through notarization. As for ordinary papers signed before the new Law comes into force, and whether they can still be presented directly to the Enforcement Court, that is a transitional question your lawyer assesses case by case, and this guide does not decide it.

The Notarization Law sets out who notarizes. The notary public (katib al-adl) is competent to notarize contracts and acknowledgments, including in particular reconciliation, and the licensed notary is entrusted, among other competences, with notarizing acknowledgments of sums of money and movables, their receipt and their waiver. So your customer's acknowledgment of the debt amount, and the settlement agreement between you, are documents that a legally competent body notarizes.

What the debt acknowledgment and settlement agreement must contain

A good agreement combines two things in one document: an express acknowledgment by the customer of the principal debt, and a settlement that sets how it will be paid. Because compulsory enforcement requires a specific right that is due, the test for every clause is that the enforcement judge can tell from the document itself how much is owed and when it falls due, without referring to correspondence or calculations outside it.

• Full details of both parties: the debtor business's legal name and its commercial register or unified number, and the capacity of the person signing for it and their authority.
• The debt amount in figures and words in riyals, and its source: the invoices or the original contract, with their numbers and dates.
• An express, unconditional acknowledgment that the amount is owed by the debtor and is due.
• The payment schedule: the exact amount and due date of each installment, the payment method and the designated bank account.
• The effect of default: what follows if an installment is late, and how the debtor is notified of the breach.
• The agreed notice method in writing, because the Regulation makes pre-enforcement notice go through the ministry's electronic systems unless the creditor and debtor agree otherwise in writing.
• Any discount granted, tied to actual payment, without a general release of the debtor before payment is complete.

Watch for one subtle point. If the right under the notarized settlement agreement or acknowledgment depends on performing an obligation whose performance cannot be confirmed from the instrument itself, for example payment conditional on delivering goods or completing work, the Law allows the right holder to file the enforcement request together with a report from one of the expert bodies accredited by the ministry proving that the obligation was performed. That is an extra step that costs time and money, so it is better to draft the acknowledgment so that the amount is fixed and due without conditions wherever possible.

Practical steps: from an amicable agreement to a notarized document

1. Assemble the debt file before any conversation with the customer: the contract, invoices, purchase orders, proof of delivery, and any correspondence in which the debtor business acknowledges the amount.
2. If no demand letter has been sent yet, start with one to fix the amount and the date of the demand, then propose a settlement to the customer as an amicable alternative to litigation.
3. Agree on the final amount and payment schedule, and prepare the draft acknowledgment and settlement using a certified template such as B-04, checking the capacity of the person signing for the debtor business.
4. Notarize the acknowledgment or settlement agreement before the body competent under the Notarization Law, a notary public or a licensed notary depending on the type of document, and keep a copy of the notarized document in the customer's file.
5. Track the installments on their dates and document every payment with a receipt, since for an installment debt the period runs for each installment separately from its due date.
6. If you later need to amend the schedule, do not settle for a message: the Regulation provides that an agreement by the parties to enforcement to amend the obligations in the executory instrument is notarized under the Notarization Law.

Notarization fees and the electronic filing steps may change from time to time, so check them on the Ministry of Justice's official channels before your meeting with the customer. This guide does not state any fee or amount that we have not verified from an official source.

If the customer defaults after the settlement: the notice of breach, then notice before enforcement

The settlement does not end the need for documentation; it moves it to a new stage. If the customer misses an installment, the first step is to document the breach itself: when the installment fell due, how much is overdue, and what period you give to cure before taking the steps the agreement allows. That is the role of template B-06 Notice of Breach, which turns the delay from a verbal matter into a written, dated notice.

A contractual notice of breach is one thing, and the statutory notice before filing an enforcement request is another. Under the new Implementing Regulation, the creditor must notify the debtor, or its representative, to pay the right under the executory instrument at least five working days before filing the enforcement request, in any of the following cases:

• If the creditor and debtor have agreed that notice is required.
• If the debtor is a private legal person, which is the case for many corporate customers.
• If the debtor dies or loses or has reduced legal capacity before the request is filed, in which case notice goes to the heirs, guardian or custodian as the case may be.
• If the right under the instrument was deferred when it was created, in which case notice is given after the due date arrives.

This notice goes through the Ministry of Justice's electronic systems unless the creditor and debtor agree otherwise in writing, and if the debtor cannot be notified, the content of the notice is announced on the website the ministry designates, and the announcement takes the place of the notice. Notice is not required where the right is a recurring periodic obligation for which an enforcement request has already been filed. So do not treat the notice of breach as a substitute for the statutory notice; it is a step that comes before it and documents your position.

Common mistakes that weaken your position before the Enforcement Court

• Relying on an acknowledgment on an ordinary paper or a chat message, then discovering that the clearest route to enforcement requires a notarized document.
• Writing a lump sum without linking it to the invoices, or leaving the amount open to debate with phrases such as subject to final reconciliation.
• Making payment conditional on something whose fulfilment does not appear from the document itself, which may require a report from an accredited expert body when filing for enforcement.
• Giving the customer a general release on signing, before they have actually paid.
• Amending the payment schedule by an unnotarized message after the agreement has become an executory instrument.
• Leaving the debt for years without follow-up, although an enforcement request is not accepted after ten years from the due date, with the period running for each installment separately.
• Accepting the signature of a person who has no authority to represent the debtor business.

Sighaty offers template B-04 Acknowledgment of Debt, bilingual, as the basis of your agreement with the customer, and template B-06 Notice of Breach for the default stage, both certified by a licensed Saudi lawyer and kept current with Saudi law. The templates are certified drafts and a strong starting point, not a substitute for advice from your lawyer on a specific dispute, and the Arabic text prevails in case of difference.

Frequently asked questions