Promissory Note Sample Uae

FORMAL COMMERCIAL PROMISSORY NOTE

Document ID: PN-UAE-2023-V1.0
Effective Date: [Effective Date]
Governing Jurisdiction: Emirate of Dubai and the Federal Laws of the United Arab Emirates

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1. STATUTORY & LEGAL COMPLIANCE NOTICE

CRITICAL LEGAL ADVICE & DISCLAIMER: This Promissory Note is drafted to conform with the applicable provisions of the Civil Transactions Law of the United Arab Emirates (Federal Law No. 5 of 1985 as amended), the UAE Commercial Transactions Law (Federal Law No. 50 of 2022), and relevant UAE judicial principles governing debt instruments, commercial obligations, and negotiable instruments.

Under UAE law, promissory notes (*Sanaf) are treated as binding commercial debt instruments. However, their enforceability via summary execution procedures in UAE courts depends strictly on proper execution, formal notarization (where applicable or strategically required), and precise compliance with UAE statutory requirements. The Maker and Holder acknowledge that they have sought independent legal counsel regarding the legal, tax, and enforcement implications of this Promissory Note within the United Arab Emirates, including the Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM) dispute resolution frameworks if elected.

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2. PARTIES & RECITALS

This Promissory Note (the "Note") is executed and delivered as of [Effective Date] (the "Effective Date"), by and between the parties identified below:

MAKER (Debtor):
[Debtor Full Legal Name], a [Corporate Entity Type / e.g., Limited Liability Company] duly organized and existing under the laws of [Jurisdiction of Incorporation], with its principal place of business / registered address at [Principal Address] (hereinafter referred to as the "Maker", which expression shall include its successors and permitted assigns).

HOLDER (Creditor):
[Creditor Full Legal Name], a [Corporate Entity Type / e.g., Limited Liability Company] duly organized and existing under the laws of [Jurisdiction of Incorporation], with its principal place of business / registered address at [Principal Address] (hereinafter referred to as the "Holder", which expression shall include its successors and permitted assigns).

RECITALS:
WHEREAS, the Maker is justly indebted to the Holder in the aggregate principal sum of [Amount in USD] United States Dollars ([Amount in Words]), arising from [Insert brief description of underlying commercial transaction, loan agreement, settlement, or value received, e.g., commercial services rendered / loan advance / asset acquisition] (the "Underlying Transaction"); and

WHEREAS, the Maker desires to formalize and secure the unconditional promise to pay the said principal sum, together with any accrued interest and collection costs, to the Holder in accordance with the strict terms and conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Maker unconditionally promises to pay to the order of the Holder the Principal Sum, pursuant to the operative terms set forth below.

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3. EXHAUSTIVE OPERATIVE CLAUSES & LEGAL TERMS

Section 1. Principal Sum and Payment Terms

1.1 Promise to Pay. For value received, the Maker unconditionally promises to pay to the order of the Holder at such address as the Holder may from time to time designate in writing, the principal sum of [Amount in USD] (USD [Numeric Amount]), lawful currency of the United States of America, payable in strict accordance with the amortization and payment schedule set forth herein.

1.2 Payment Schedule. The principal balance and any accrued interest shall be paid by the Maker to the Holder in the following manner:

• Option A (Lump Sum): The entire principal sum, together with all accrued and unpaid interest, shall be due and payable in a single bullet payment on or before [Maturity Date] (the "Maturity Date").
• Option B (Installments): The principal sum shall be paid in [Number] consecutive monthly installments of [Installment Amount in USD] each, commencing on [First Installment Date], and continuing on the same day of each successive month thereafter, with a final balloon payment of all remaining principal and interest due on [Final Maturity Date] (the "Maturity Date").

1.3 Method of Payment. All payments under this Note shall be made in immediately available funds via wire transfer to the designated bank account of the Holder provided in writing by the Holder to the Maker. Payment shall be deemed received only upon actual credit of funds to the Holder’s bank account.

Section 2. Interest Rate and Default Interest

2.1 Stated Interest Rate. The principal balance outstanding under this Note shall bear interest at the rate of [Interest Rate, e.g., 5%] per annum, calculated on the basis of a 365-day year and the actual number of days elapsed, commencing on the Effective Date and continuing until this Note is paid in full.

2.2 Default Interest. Upon the occurrence of any Event of Default (as defined herein), and without prejudice to any other rights or remedies available to the Holder under UAE law or this Note, the outstanding principal balance and any overdue installment shall bear default interest at the maximum rate permitted under applicable UAE law, or the rate of [Default Interest Rate, e.g., 12%] per annum, whichever is lower, calculated from the date of default until the date of actual payment in full.

Section 3. Prepayment

3.1 Right to Prepay. The Maker shall have the right to prepay the outstanding principal balance of this Note, in whole or in part, at any time prior to the Maturity Date, without penalty or premium, provided that the Maker delivers written notice of such prepayment to the Holder at least ten (10) business days prior to the intended prepayment date.

3.2 Application of Prepayments. Any partial prepayment shall be applied first to the payment of any accrued and unpaid default interest, second to accrued regular interest, and third to the reduction of the outstanding principal installments in the inverse order of their maturity.

Section 4. Events of Default

The occurrence of any one or more of the following events shall constitute an "Event of Default" under this Note: 4.1 Failure to Pay. The Maker fails to pay any principal, interest, or other sum due under this Note within [Number, e.g., 5] business days of its due date. 4.2 Breach of Covenants. The Maker fails to perform, observe, or comply with any other material covenant, term, or condition contained in this Note or any related agreement executed in connection herewith. 4.3 Insolvency and Bankruptcy. The Maker becomes insolvent, ceases to pay its debts as they mature, makes an assignment for the benefit of creditors, files a voluntary petition in bankruptcy or insolvency, or is subjected to any involuntary bankruptcy, liquidation, receivership, or restructuring proceedings under the UAE Bankruptcy Law (Federal Decree-Law No. 9 of 2016 and its amendments) or any analogous foreign jurisdiction. 4.4 Execution or Attachment. Any attachment, execution, or other legal process is levied against a material portion of the assets of the Maker and is not discharged within thirty (30) days. 4.5 Cross-Default. Any default occurs under any other credit facility, loan agreement, promissory note, or commercial obligation between the Maker and the Holder or any affiliate of the Holder.

Section 5. Acceleration of Maturity

Upon the occurrence of any Event of Default, and at any time thereafter during the continuance of such Event of Default, the Holder may, at its sole option, by written notice to the Maker, declare the entire unpaid principal balance of this Note, together with all accrued interest and any other amounts payable hereunder, to be immediately due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Maker.

Section 6. Representations and Warranties

The Maker hereby represents and warrants to the Holder, as of the Effective Date, that: 6.1 Due Organization and Authority. The Maker is a legal entity duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation, and has all requisite corporate power and authority to execute, deliver, and perform its obligations under this Note. 6.2 Binding Obligation. This Note has been duly authorized, executed, and delivered by the Maker and constitutes a legal, valid, and binding obligation of the Maker, enforceable against the Maker in accordance with its terms. 6.3 No Conflict. The execution, delivery, and performance of this Note do not and will not violate any provision of the constitutional documents of the Maker, or any law, regulation, order, judgment, or agreement binding upon the Maker.

Section 7. Waivers and Consents

7.1 Waiver of Formalities. The Maker and any endorsers, sureties, and guarantors hereof severally waive presentment for payment, demand, notice of nonpayment, protest, notice of protest, notice of dishonor, and all other notices in connection with the delivery, acceptance, performance, default, or enforcement of this Note. 7.2 No Waiver by Holder. No failure or delay on the part of the Holder in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.

Section 8. Costs of Collection and Enforcement

If this Note is placed in the hands of an attorney for collection, or is collected through any legal proceeding, bankruptcy, or probate court, or if the Holder is forced to enforce any of its rights hereunder, the Maker promises to pay to the Holder all reasonable costs and expenses of collection and enforcement, including, without limitation, reasonable legal fees, court costs, arbitration expenses, and expert witness fees.

Section 9. Governing Law and Dispute Resolution

9.1 Governing Law. This Note, and all claims or causes of action (whether in contract, tort, or statute) that may be based upon, arise out of, or relate to this Note, shall be governed by, and enforced in accordance with, the laws of the Emirate of Dubai and the applicable federal laws of the United Arab Emirates, without regard to conflict of laws principles.

9.2 Jurisdiction and Arbitration.

• Option 1 (Default Courts): Any dispute, controversy, or claim arising out of or relating to this Note, including its formation, validity, binding effect, interpretation, performance, breach, or termination, shall be submitted to the exclusive jurisdiction of the competent courts of Dubai, United Arab Emirates.
• Option 2 (Arbitration - Recommended for cross-border transactions): Any dispute, controversy, or claim arising out of or relating to this contract, including its formation, validity, binding effect, interpretation, performance, breach, or termination, shall be referred to and finally resolved by arbitration administered by the Dubai International Arbitration Centre (DIAC) in accordance with the DIAC Arbitration Rules. The place of arbitration shall be Dubai, United Arab Emirates. The language of the arbitration shall be English. The arbitral tribunal shall consist of a sole arbitrator.

Section 10. Miscellaneous Provisions

10.1 Severability. If any provision of this Note is held to be invalid, illegal, or unenforceable by a court or arbitral tribunal of competent jurisdiction, such provision shall be modified to the minimum extent necessary to make it valid, legal, and enforceable. If such modification is not possible, the affected provision shall be deemed severed from this Note, and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

10.2 Entire Agreement. This Note constitutes the entire agreement between the Maker and the Holder with respect to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations, and warranties, both written and oral, with respect to such subject matter.

10.3 Amendments and Waivers. No amendment, modification, or waiver of any provision of this Note shall be valid unless the same is in writing and signed by both the Maker and the Holder.

10.4 Successors and Assigns. This Note shall be binding upon and inure to the benefit of the Maker and the Holder and their respective successors, legal representatives, and permitted assigns. The Holder may freely assign, transfer, or pledge this Note, in whole or in part, to any third party without the prior written consent of the Maker. The Maker may not assign or transfer its obligations under this Note without the prior written consent of the Holder.

10.5 Notices. All notices, demands, requests, or other communications required or permitted to be given under this Note shall be in writing and shall be deemed to have been duly given if delivered personally, sent by registered or certified mail (return receipt requested and postage prepaid), or transmitted by electronic mail with confirmed delivery, to the addresses set forth in the introductory paragraph of this Note, or to such other address as either party may designate by notice given in accordance with this Section.

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4. EXECUTION & FORMAL SIGNATURE BLOCKS

IN WITNESS WHEREOF, the Maker has caused this Promissory Note to be duly executed by its authorized representative as of the Effective Date first written above.

FOR THE MAKER ([Company Full Legal Name]):

Signature: _____________________________________
Printed Name: [Authorized Signatory Name]
Title: [Title / Role, e.g., Managing Director / CEO]
Company: [Company Legal Name]
Date: [Date]

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FOR THE HOLDER ([Client Full Legal Name]):

Signature: _____________________________________
Printed Name: [Authorized Signatory Name]
Title: [Title / Role, e.g., Director / Authorized Agent]
Company: [Company Legal Name]
Date: [Date]

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5. STEP-BY-STEP EXECUTION & FILING GUIDE

1. Document Review & Customization: Open this document in Microsoft Word or Google Docs. Locate all bracketed placeholders (e.g., [Company Full Legal Name], [Amount in USD], [Effective Date]) and replace them with accurate, verified data corresponding to the transaction. Ensure currency amounts are explicitly stated in both numeric and written text formats to prevent ambiguity.
2. Signatory Verification (Corporate Authority): Verify that the individual signing on behalf of the Maker possesses valid corporate authority. For UAE entities, examine the company’s Trade License, Memorandum of Association (MoA), and Board Resolution or Power of Attorney (PoA) granting explicit authority to execute debt instruments and promissory notes.
3. Digital or Wet-Ink Execution:
   • Wet-Ink: Print two (2) original hard copies. Ensure the authorized signatories execute both copies with corporate stamps/seals affixed (if required by the company's internal governance or licensing jurisdiction).
   • Digital: Upload the finalized document to an enterprise-grade digital signature platform compliant with UAE Electronic Transactions and Trust Services Law (Federal Decree-Law No. 46 of 2021), such as DocuSign or Adobe Sign, ensuring multi-factor authentication (MFA) verification of signatories.
4. Notarization & Attestation Strategy: While promissory notes are binding under private signature, for enhanced enforceability and expedited execution procedures before UAE courts, consider having the signatures formally attested by a UAE Public Notary or via the Dubai Notary Public digital portal, or structure the transaction within a DIFC/ADGM framework.
5. Record Retention: Retain the fully executed original Promissory Note in a secure, fireproof corporate vault or encrypted digital repository. The Holder must retain physical possession of the original physical instrument if required for negotiation, endorsement, or enforcement proceedings under applicable commercial laws.