There is no doubt that the cheque, as a commercial instrument and a means of payment, holds significant legal importance. Recognizing this, Federal Decree-Law No. 50 of 2022 on the Issuance of the Commercial Transactions Law dedicates its third section to regulating cheques. In specific cases defined under this law, a cheque may be treated as an executive instrument, enabling the bearer to seek its enforcement, either in full or in part, through compulsory execution, as provided for in Article 667 of the Federal Commercial Transactions Law.
This article identifies two scenarios in which a cheque qualifies as an executive instrument. The first is when the cheque is dishonored due to insufficient funds or a total absence of funds in the account. The second is when the cheque is returned due to the account being closed. While the latter scenario is not expressly provided for in the text of the law, it has been affirmed through a binding principle issued by the Committee for the Unification of Judicial Principles, applicable to both federal and local courts, which equates the legal effect of a cheque returned due to account closure with that of a cheque returned for insufficient or unavailable funds.
Other instances where a cheque does not qualify as an enforceable instrument such as when it is dishonored due to a discrepancy between the drawer's signature on the cheque and the signature on file with the drawee bank which require the claimant to pursue legal action through ordinary judicial procedures. In such cases, the value of the cheque must be claimed by filing an order for payment, rather than through direct enforcement.
Delay by the cheque holder in claiming the cheque amount may result in the forfeiture of their right, which in some cases could lead to the dismissal of the lawsuit. This is because the law sets specific time limits for such claims, particularly in cases where the cheque is not considered an enforceable instrument.
In this article, we clarify the legal time limits established for claiming the value of a cheque before the courts and explain how failure to comply with these deadlines may result in the loss of the right to claim the cheque's value, leading to the inadmissibility of the claim.
According to Article 670 of Federal Decree-Law No. 50 of 2022 on the Issuance of the Commercial Transactions Law, the cases in which a claim for the value of a cheque shall not be heard without an acknowledgment or a legitimate excuse are specified. The first paragraph of this article provides that a claim by the cheque holder against the drawer, endorsers, and other obligors to pay the value of the cheque shall not be heard if filed after two years from the expiry of the period for presenting the cheque for payment.
The second paragraph of the same article stipulates that a claim by the obligors against each other shall not be heard if filed after one year from the date the obligor paid the value of the cheque or from the date he was judicially demanded to make the payment.
The third paragraph of the article provides that the time limit for hearing the cheque holder's claim against the drawee bank is three (3) years from the expiry date of the period for presenting the cheque.
Moreover, paragraph four of the referenced article stipulates that the deadlines mentioned in the first three paragraphs do not apply to lawsuits filed by the cheque holder against the drawer if it is proven that the drawer (the cheque issuer) did not provide consideration for payment at the cheque's due date, or provided the consideration but subsequently withdrew all or part of it. Similarly, these deadlines for dismissal do not apply to lawsuits against other obligors who have obtained unjust enrichment.
From the text of this paragraph, two important matters can be understood:
The plea of dismissal of the lawsuit is not admissible from the drawer if it is proven that he did not provide consideration at the cheque's due date, or if he provided it but subsequently withdrew all or part of it. This also applies to lawsuits against other obligors who have gained unjust enrichment.
The period for dismissal of the lawsuit in this case is determined based on the reason the cheque was issued, whether it pertains to a commercial debt under a contract or otherwise. It is the responsibility of the substantive court to decide this, based on the appropriate legal characterization of the facts of the dispute relied upon by the party invoking the dismissal plea.
In short, the beneficiary of a cheque except in cases where the cheque is an executive deed must not delay in claiming the cheque's value to avoid losing the right to claim and having the court declare the lawsuit inadmissible.
The limitation period for the beneficiary to file a lawsuit against the drawer, endorsers, and those liable for the cheque's value, in cases of joint liability of multiple drawers, is two years from the date the cheque was due to be presented for payment.
The right to claim against the liable parties expires upon payment by any one of them, with the paying party's right to recover from the others expiring one year from the payment date or from the date of legal demand for payment.
Finally, a lawsuit filed by the cheque holder against the drawee bank will not be accepted if more than three years have passed since the cheque's due date for presentation.
This underscores the importance of observing the deadlines mentioned in paragraphs 1, 2, and 3 of Article 670 of Decree-Law No. 50 of 2022 issuing the Commercial Transactions Law when claiming the cheque's value.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
