Legal and commercial aspects of the check

Legal and commercial aspects of the check

A check is considered one of the most important financial and commercial tools that plays a major role in facilitating commercial and financial transactions. It is a commercial paper used as a means of fulfilling financial obligations instead of money, which allows parties to carry out transactions in a safe and fast manner. A check is a reliable guarantee for payments between individuals and companies, and enhances trust between the parties concerned in various commercial sectors. Within the framework of modern financial systems, the importance of a check has gone beyond just being a means of payment It also reflects the development of commercial tools that help facilitate financial flows and avoid the risks associated with carrying cash. The Kingdom of Saudi Arabia is keen to provide the appropriate environment for the effective and sound use of checks, which enhances commercial activity and contributes to achieving financial stability, and provides a precise legal framework governing the issuance and trading of checks. We find that the Commercial Papers System includes the conditions and requirements necessary to create a check and consider it a committed legal document People wishing to use checks must comply with these controls, in order to ensure transparency and credibility in financial operations, and through this article, we will discuss the legal and commercial aspects of the check, and how it contributes to enhancing commercial confidence and stimulating economic growth.

Definition of check in the commercial paper system

A check is a document that includes a written order issued by the account holder (drawer) to the drawee (bank) to pay a certain amount to a person. Checks issued in the Kingdom of Saudi Arabia and due for payment may only be drawn on a bank, and checks drawn in the form of checks on a non-bank are not considered valid checks.

Data that the check must include

The check must include the following information:

1. The word (check) is written in the body of the instrument in the language in which it was written.
2. An order that is not conditional upon the payment of a certain amount of money.
3. Name of the person obligated to pay (the drawee).
4. Place of loyalty.
5. Date and place the check was created.
6. Signature of the person who created the check (drawer).

It is worth noting that a check devoid of any of the above data is not considered a check except in the following two cases:

1. If the check is devoid of a statement of the place of payment, it shall be deemed due in the place indicated next to the name of the drawee. If there are multiple places indicated next to the name of the drawee, the check shall be deemed due in the first place thereof. If the check is devoid of such statements or any other statement, it shall be deemed due in the place where the principal place of payment of the drawee is located.
2. If the check does not indicate the place of establishment, it shall be considered established in the place shown next to the drawer’s name.

Legal and commercial aspects of the check

Check fulfillment controls

A check may not be issued unless the drawer has with the drawee at the time of creating the check money that he can dispose of by virtue of a check in accordance with an express or implied agreement, and the drawer of the check or the person ordering another to withdraw it on his behalf must pay in exchange for its fulfillment, however the drawer on behalf of another remains personally responsible towards the endorsers and the holder and no one else In the event of denial, the drawer alone must prove that the person to whom the check was drawn had payment at the time it was created. If this is not proven, he is liable for payment, even if the protest was made after certain dates. The absence of payment or its insufficiency does not result in the check being invalid.

It is worth noting that it is permissible to require that the check be paid to:

1. A specific person with or without expressly stating the condition of the order.
2. A specific person stating a condition (not an order) or any other phrase to that effect.
3. Check holder.

A check drawn for the benefit of a specific person and stated in the phrase (or for its bearer) or any other similar phrase is considered a check for its bearer. If the name of the beneficiary is not specified, the check is considered for its bearer. A check that includes a condition (not negotiable) is only paid to its bearer who received it in conjunction with this condition.

On the other hand, a check may be drawn for the drawer’s own order, or it may be drawn for another person’s account. It may not be drawn on the drawer himself unless it is drawn between branches of a bank controlled by a single principal position. The check must not be due to the bearer, and the drawer guarantees the check’s payment. Any condition that exempts the drawer himself from this guarantee is considered as if it never existed.

Check trading and approval controls

A conditional check paid to a specific person, whether or not the condition of the order is explicitly stated, is negotiable by endorsement. A conditional check paid to a specific person with the phrase (not for an order) or any other similar phrase written on it may not be negotiable except by following the provisions of the transfer of right.

It is permissible to endorse even the drawer or any other obligor, and these persons may endorse the check again. Endorsement to the drawee is considered a settlement, unless the drawee has several establishments and the endorsement is made for the benefit of an establishment other than the one on which the check was drawn.

The check due to the bearer shall be circulated upon delivery, and the endorsement written on this check shall make the endorser responsible in accordance with the provisions of recourse, but this endorsement shall not result in the check becoming a check for an order.

On the other hand, the drawee may not sign an acceptance check, and any acceptance written on it is considered as if it did not exist. However, the drawee may mark the check with his approval. This phrase indicates the existence of a payment consideration on the date of marking, and the drawee may not refuse to approve the check if he has a payment consideration sufficient to pay its value. The drawee’s signature on the front of the check is considered an approval for him.

Legal and commercial aspects of the check

Controls for presenting and fulfilling a check

It should be noted that the check is due for payment as soon as it is viewed, and any statement to the contrary is considered as if it did not exist. If the check is submitted for payment before the day specified in it as the date of its issuance, it must be paid on the day of its submission.

A check drawn in the Kingdom and due for payment must be submitted for payment within one month. If it is drawn outside the Kingdom and due for payment, it must be submitted within three months. The aforementioned dates begin from the date indicated on the check as the date of its issuance. Submitting the check to one of the recognized clearing houses is considered a submission for payment.

If a check is drawn between two different places in the calendar, the date of its issuance shall be returned to the corresponding day in the calendar of the place of payment, and the drawee may pay the value of the check even after the expiry of the deadline for submitting it. The drawer shall not object to the check being paid before the expiry of the deadline for submitting it except in the event of its loss, the bankruptcy of its holder, or anything occurring that would impair his capacity If the drawer dies, goes bankrupt, or loses his capacity after the check is created, this does not modify the effects resulting from it.

If several checks are presented at the same time and the payment consideration is not sufficient to pay them all, the dates of their withdrawal must be taken into consideration. If the presented checks are separated from one book and bear one date of issue, the previous check shall be preferred by a number. Also, if the check is required to be paid in the Kingdom in cash not in circulation, its amount must be paid at the time of presenting the check in cash in circulation in the Kingdom according to its price on the day of payment If payment is not made on the day of submission, the holder has the choice between claiming the amount of the check denominated in cash in circulation in the Kingdom according to its price on the day of submission or on the day of payment. If the check is submitted for the first time after the deadline for submission has expired, the price of the day on which the deadline for submission ended is taken into account. The prevailing custom in the Kingdom follows the foreign exchange calendar, but the drawer may specify in the check the price on the basis of which the amount to be paid is calculated If the amount of the check is set in money bearing a common name but whose value in the country of issue differs from its value in the country of payment, then what is meant is the money of the country of payment.

Effects of refraining from paying the check

The holder of a check may appeal to those obligated to pay it together or individually if he presents it within the regular deadline and its value is not paid, and the refusal is proven by protest. Instead of protest, it is permissible to prove the refusal to pay, by a statement issued by the drawee stating the day the check was presented, or by a statement issued by a recognized clearing house stating that the check was presented within the legal deadline and its value was not paid.

In both cases, the statement must be dated and written on the check itself and signed by the person from whom it was issued. It is not permissible to refrain from placing this statement on the check if the holder requests it, even if the check includes a condition of return without expenses. Rather, the person obligated in his capacity may request a period not exceeding the next working day to submit the check, even if it is submitted on the last day of the submission date.

Refusal to pay in the previous manner must also be proven before the expiry of the application deadlines. If the application occurs on the last day of this deadline, it is permissible to prove refusal to pay on the next business day.

Check underline controls

The drawer and bearer of the check may underline it by placing two parallel lines at the front of the check. The underline may be general or specific. If there is no statement between the two lines, or if the word (bank) or any other word is written between them in this sense, the underline shall be general. However, if the name of a specific bank is written between the two lines, the underline shall be specific. It is permissible for the general underline to become a specific underline As for the special underline, it is not impossible for it to be a general underline, and it is considered as if the underline or the name of the bank written between the two lines had not been crossed out.

On the other hand, the drawee may not pay a general underlined check except to one of his clients or to a bank, and he may not pay a special underlined check except to the bank whose name is written between the two lines and to the client of this bank if the latter is the drawee. However, the bank whose name is written between the two lines may entrust another bank to collect the value of the check A bank may not obtain an underlined check except from one of its clients or from another bank, nor may it collect its value on behalf of persons other than a male. If the check bears several special lines, the drawee may not pay it unless it bears two lines, one of which is for its value to be collected through a clearing house.

The drawer or bearer of the check may stipulate that it will not be paid in cash by placing on its front the phrase (registration in the account) or any other phrase that conveys the same meaning. In this case, the drawee shall have no choice but to settle the value of the check through written entries such as registration in the account, bank transfer, or set-off. These entries shall take the place of payment, and the cancellation of a statement (of the registration in the account) shall not be taken into account.

The effect of not submitting the check to the bank on the scheduled date

The holder of a check loses his rights before the drawer, the endorsers, and other obligors, except for the drawee, due to the passage of the specified dates for presenting the check to the drawee or for filing a protest or what takes its place on the specified date. However, this provision does not benefit the drawer unless he has provided payment consideration, and this consideration remained with the drawee until the expiry of the date for presenting the check, and then the consideration was removed by an act not attributed to the drawer.

Cases of failure to hear claims related to the check

It is worth noting that no claims shall be heard for the bearer to return to the drawee, the drawer, the endorser, and other obligors after six months have passed from the date of expiry of the check submission period. No claims shall be heard for the obligors to return the check towards each other after six months have passed from the day on which the obligor paid it or from the day on which the claim was filed against him.

Legal and commercial aspects of the check

Legal services related to checks from the office of Lawyer Abdul Majeed Al Rashid vary between legal consultations and regulatory procedures aimed at regulating the use of checks as commercial paper and resolving disputes related to them. This includes legal consultations on how to write a check correctly, collecting checks, procedures for dealing with returned checks, procedures for stopping check cashing, filing lawsuits related to checks, and filing enforcement requests.