Understanding Limitation of Actions in UAE Cheque Litigation: A Comprehensive Legal Analysis of Article 670
Exploring statutory deadlines, exceptions, and their impact on cheque transactions, obligors, and commercial certainty in UAE law.
By Pratima
Article 670 of cheque law sets strict deadlines for filing legal claims, balancing the rights of the bearer, drawer, and other obligors. Understanding these time limits is crucial for anyone dealing with cheques in commercial transactions.
Cheques are a widely accepted instrument of payment and security. To maintain trust and stability in business dealings, lawmakers impose statutory time limitations on initiating claims. Article 670 ensures legal certainty, prevents indefinite litigation, and promotes accountability among parties.
What Is Article 670 of Cheque Law?
Article 670 establishes the maximum time limits within which legal actions related to cheques can be filed:
- Bearer claims against the drawer and obligors: 2 years from the expiry of the presentment period
- Recourse among obligors: 1 year from payment or judicial claim
- Bearer claims against the drawee (bank): 3 years from the expiry of presentment
- Exceptions: Cases involving fraud, illicit gain, or insufficient consideration
These rules create a balance between timeliness and fairness, ensuring commercial transactions are secure while deterring fraudulent conduct.
Who Can Sue and When?
- Bearer vs. Drawer and Other Obligors
The bearer of a cheque cannot sue the drawer, endorsers, or other obligors after two years from the presentment period.
- Timeliness: Bearers must act promptly.
- Finality: Obligors are protected from stale claims.
- Recourse Among Obligors Obligors who have paid a cheque can claim from prior endorsers within one year of paying or being sued. This encourages quick resolution and prevents prolonged disputes.
- Bearer vs. Drawee (Bank) A bearer can file a claim against the drawee bank within three years of the presentment period. Banks have a direct obligation to honor cheques, so the law provides a slightly longer timeframe.
What Are the Exceptions to Cheque Limitations?
Article 670 allows exceptions when:
- The drawer issues a cheque without consideration or withdraws funds after issuance
- Obligors earn an illicit gain
These exceptions prevent fraudulent activity and ensure justice is served even if statutory deadlines have passed.
Legal and Commercial Implications
- Certainty: Time limits prevent disputes from lingering indefinitely.
- Fairness: Exceptions protect against fraud and illicit profits.
- Practical advice: Bearers and obligors must initiate proceedings promptly to protect their rights.
Lawyers should advise clients to respect these deadlines to avoid forfeiting claims. Businesses must ensure cheque management policies align with Article 670.
Conclusion
Article 670 reflects a careful balance between commercial stability, legal certainty, and moral accountability. By enforcing strict deadlines while allowing exceptions for fraud or illicit conduct, the law preserves the integrity of cheque transactions and ensures fairness in commercial dealings.
FAQs About Article 670
Q: How long can a bearer sue the drawer of a cheque?
A: A bearer can sue the drawer or obligors within two years from the expiry of the presentment period.
Q: Can obligors sue each other after paying a cheque?
A: Yes, but only within one year from paying the cheque or being sued.
Q: What is the time limit for suing the drawee bank?
A: A bearer can sue the drawee bank within three years from the expiry of the presentment period.
Q: What permits do contractors need in Dubai?
A: Yes, limitations do not apply if the drawer issued a cheque without consideration or if an obligor earned illicit gain.
Q: Why are these limitations important?
A: These rules ensure timeliness, fairness, and commercial certainty, preventing indefinite disputes while deterring fraud.