Guarantee contract: its types and effects in the Saudi system

Abstract

This research aims to highlight the "guarantee" contract as one of the most important credit documentation contracts in the Saudi legal system, in light of the modern provisions established by the Civil Transactions Law issued by Royal Decree No. (M/191) dated 1444 AH. The research adopted a descriptive-analytical approach to examine the Sharia and legal provisions governing this contract, beginning with the definition and legitimacy of guarantee, then outlining its essential elements and valid conditions, and its main types (financial guarantee and personal guarantee), culminating in an analysis of its legal effects on the contracting parties and the circumstances of its termination and lapse.

The research reached several key conclusions, most notably: that the Saudi legislator has achieved a fair legislative balance that protects the rights of the creditor on the one hand, and safeguards the guarantor's liability from abuse on the other, through the establishment of precise legal controls such as the "right of search" (the obligation to first pursue the assets of the original debtor unless the guarantee is joint and several), and the guarantor's right to uphold the defenses of the original debtor.

In light of this, the research recommended that individuals be aware of the financial solvency of the person they are guaranteeing before signing a guarantee contract, and that they be fully familiar with the legal terms stipulated in the contract to avoid unforeseen financial and legal consequences. It also recommended continued applied studies of guarantee provisions in light of recent judicial interpretations.