UAE: Legal Limitation Bars Bearer from Suing Drawer or Obligors After Two Years from Cheque Presentment Period

Cheques occupy a central position in commercial transactions, serving as a widely accepted instrument of payment and security in business dealings. To maintain the sanctity of cheque transactions and to strike a balance between the rights of the bearer and the obligations of the drawer, legislators have introduced statutory time limitations for initiating legal actions. 

Article 670 sets forth specific time limits within which lawsuits concerning cheques must be filed, failing which such claims will not be entertained unless a legitimate excuse is established. This article ensures legal certainty, discourages indefinite litigation and provides a framework for accountability among parties to a cheque.

 

1. Lawsuit of Recourse by the Bearer Against the Drawer and Other Obligors
   The first clause of Article 670 states that the bearer of a cheque may not bring a lawsuit of recourse against the drawer, endorsers, or other obligors for the cheque’s value after two years from the expiry of the time limit set for presentment. This provision highlights two critical principles:

    

• Timeliness: The bearer must act diligently and cannot indefinitely hold obligors liable.

• Finality: Obligors gain protection against stale claims after the statutory period lapses.
  
  This two-year period balances the rights of the bearer with the need for commercial stability, ensuring that financial obligations do not remain perpetually uncertain.

   

1. Recourse Among Obligors
   The second clause provides that obligors (such as endorsers who have paid the cheque’s value) may not sue each other after the lapse of one year from the day one of them settles the value of the cheque, or from the date of a judicial claim against them.

   
   This is crucial because once an obligor satisfies the bearer’s claim, they acquire a right of recourse against prior endorsers. However, the law imposes a shorter limitation period of one year to encourage timely resolution among obligors and avoid prolonged disputes.

    

2. Lawsuit by the Bearer Against the Drawee
   The third clause distinguishes actions against the drawee (typically the bank) by stating that the bearer cannot file a lawsuit after three years from the expiry of the presentment period. The rationale here is clear: since the drawee has a direct obligation to honour the cheque upon presentation, a longer time frame is permitted. However, even this obligation cannot remain indefinite, and the three-year cap ensures finality in banking transactions.

    

3. Exceptions to Limitation Rules
   Clause four of Article 670 carves out significant exceptions. The limitation periods do not apply:

    

• To a drawer who issued a cheque without providing consideration for payment, or who withdrew the consideration (funds) either fully or partially after issuance.

• To lawsuits against obligors who have earned an illicit gain.
  These exceptions reflect the law’s policy to deter fraudulent or dishonest conduct. A drawer who issues a cheque without adequate funds, or later withdraws the funds to defeat the purpose of the cheque, should not benefit from statutory limitation protections. Similarly, obligors who profit illicitly cannot hide behind limitation rules.
  
  
   

1. Legal and Commercial Implications
   Article 670 creates a delicate balance between certainty and fairness. On one hand, it provides definitive time limits, which enhance commercial confidence by ensuring that financial disputes do not linger indefinitely. On the other hand, it introduces exceptions where fraud or illegality is involved, thereby preserving justice and discouraging abuse of the system.

   
   From a practical standpoint, cheque bearers and obligors must remain vigilant about their rights and obligations. Businesses and individuals relying on cheques must initiate proceedings within the stipulated periods to avoid forfeiting their rights. Lawyers, too, must advise clients on the importance of acting within these deadlines.

Conclusion

Article 670 underscores the principle that the enforceability of cheque-related claims is not unlimited but subject to strict statutory deadlines. These provisions encourage prompt action, preserve the integrity of cheque transactions, and prevent misuse of legal processes. At the same time, by excluding cases involving fraudulent or illicit conduct from these limitations, the law maintains fairness and justice in commercial dealings.

 

In essence, Article 670 represents a careful blend of commercial expediency, legal certainty, and moral accountability, reflecting the broader policy objectives of cheque law within the civil and commercial legal framework.

 

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