SCA SAC 4530251879-2024 Issued on 30-1-2024

This case involved a challenge to the enforcement of promissory notes provided as guarantees for an advanced payment for a project. Issues included whether the enforcement could be challenged before the promissory notes were presented.

Background

This dispute concerned a commercial disagreement between two companies over the enforceability of promissory notes. The claimant sought a ruling that the defendant was not entitled to enforce a number of promissory notes which, according to the claimant, had already been extinguished or were being wrongfully retained. The claimant argued that the defendant was holding nine promissory notes, each with a value of 708,750 Saudi riyals, amounting in total to 6,378,750 riyals. This was said to be far in excess of the advance payment originally made by the defendant, which was only 708,750 riyals, and disproportionate to the overall value of the project, which was just 1,417,000 riyals. The claimant maintained that the promissory notes had been issued only as security against the advance payment and not as a general guarantee for all projects, and therefore should not continue to be enforceable.