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An IOU Agreement, also known as "I Owe You" in Saudi business practices, is a simple written promise to repay borrowed money or deliver specific goods. It creates a legally binding commitment under Saudi civil law, though it's less formal than a full promissory note or commercial paper.

In the Kingdom's business environment, IOUs must include essential details like the amount owed, payment date, and both parties' information to be enforceable. While commonly used for personal loans and small business transactions, Islamic finance principles require that IOUs avoid interest (riba) and clearly state the repayment terms. Courts generally recognize these agreements when they comply with Shariah guidelines.

Use an IOU Agreement when lending money or goods informally in Saudi Arabia, especially for short-term transactions between friends, family members, or business associates. This document proves particularly valuable for amounts below SAR 50,000, where a formal loan contract might seem excessive but you still need written proof of the transaction.

The agreement becomes essential in situations requiring quick financial arrangements without immediate access to banks or formal lending institutions. It offers protection for both parties while maintaining Shariah compliance. Many Saudi businesses use IOUs for inventory advances, temporary cash flow needs, or when extending credit to trusted customers under informal terms.

• Basic Money IOU: The simplest form used for personal loans, stating only the amount, date, and parties involved
• Goods-Based IOU: Used for business inventory or product advances, specifying exact items and their market value
• Installment IOU: Details multiple payment dates and amounts, common in small business transactions
• Shariah-Compliant IOU: Explicitly structured to avoid interest and conform to Islamic finance principles
• Witnessed IOU: Includes signatures from two witnesses, offering stronger legal protection in Saudi courts

• Individual Lenders: Private persons extending personal loans or credit to friends, family, or business associates through IOU Agreements
• Small Business Owners: Use IOUs for short-term inventory financing or extending credit to trusted customers
• Islamic Finance Advisors: Review and ensure IOU terms comply with Shariah principles
• Witnesses: Third parties who validate the agreement's authenticity and can testify in Saudi courts if needed
• Legal Representatives: Help draft and enforce IOUs when disputes arise, ensuring compliance with Saudi civil law

• Party Details: Gather full legal names, national ID numbers, and contact information for both lender and borrower
• Loan Specifics: Document exact amount in SAR, repayment date(s), and any agreed-upon terms for late payment
• Shariah Compliance: Ensure the agreement avoids interest and clearly states the purpose of the loan
• Witness Information: Arrange for two adult witnesses and collect their identification details
• Documentation: Use our platform to generate a legally-sound IOU template that includes all mandatory elements under Saudi law
• Signatures: Plan for all parties to sign in the presence of witnesses, with each keeping a copy

• Party Identification: Full legal names, addresses, and national ID numbers of lender and borrower
• Loan Details: Precise amount in SAR, purpose of the loan, and clear repayment terms
• Payment Schedule: Specific dates or timeline for repayment, including any installment arrangements
• Shariah Compliance: Statement confirming the agreement follows Islamic finance principles
• Witness Section: Space for two witness signatures with their identification details
• Execution Block: Date, location, and signature spaces for all parties
• Default Terms: Clear consequences for non-payment without including interest penalties

An IOU Agreement differs significantly from a Loan Agreement in several key aspects under Saudi law. While both documents deal with borrowed money, their formality, legal weight, and typical applications vary considerably.

• Legal Formality: IOUs are informal documents suitable for small, personal transactions, while Loan Agreements are formal contracts typically used by banks and financial institutions
• Documentation Level: IOUs contain basic repayment promises and essential details, whereas Loan Agreements include comprehensive terms, conditions, and security provisions
• Enforcement Power: While both are legally binding in Saudi courts, Loan Agreements offer stronger enforcement mechanisms and clearer remedies for default
• Shariah Compliance: Loan Agreements often include detailed Islamic finance structures, while IOUs typically rely on simpler profit-sharing or interest-free arrangements