Document background
The Advance Purchase Agreement is essential in Saudi Arabian commercial transactions where advance payments are required to secure goods or services. This document is particularly relevant in industries requiring significant capital investment or custom-manufactured items, where suppliers need upfront funding to commence production or secure materials. The agreement must comply with both Saudi commercial law and Sharia principles, particularly regarding the certainty of obligations and the permissibility of advance payments. It typically includes detailed specifications of goods/services, payment terms, delivery schedules, and quality requirements, along with appropriate security mechanisms such as bank guarantees or documentary credits to protect the buyer's advance payment. The document is structured to provide clear rights and obligations while ensuring enforceability under Saudi jurisdiction.
