Commercial Papers Flashcards
What are commercial papers?
Negotiable instruments representing a right to a sum of money payable either on sight or at a fixed or determinable date.
Give examples of commercial papers.
- Bills of exchange
- Promissory notes
- Cheques
What is not considered a commercial paper?
Instruments involving obligations other than money, such as bills of lading or company shares.
Define a bill of exchange.
A written order by the drawer instructing the drawee to pay a specified amount to the payee.
Who are the parties involved in a bill of exchange?
- Drawer
- Drawee
- Payee
What is a promissory note?
A written promise from the maker to pay a specified sum to the payee at a future date.
List key features of a promissory note.
- Must include the words ‘promissory note’
- Unconditional promise to pay
- Amount in figures and words
- Specify maturity date, place of payment, and beneficiary’s name
- Include date of issuance and maker’s signature
What is a cheque?
An order by the drawer to a drawee bank to pay a certain amount to a payee.
What is a key difference between a cheque and a bill of exchange?
A cheque is always drawn on a bank, while a bill of exchange can be drawn on an individual or a bank.
What are the banking rules for cheques?
- Cheque books issued with account holder’s name and number
- Signature must match bank’s records
- Can be payable to a named person or to bearer
- If no specified payee, payable to holder
What is the partial payment requirement for cheques with insufficient funds?
The bank must make a partial payment unless the bearer refuses.
What happens if multiple cheques are presented simultaneously?
They are paid in order of issuance date.
What is the consequence of a bounced cheque marked ‘unpaid due to insufficient funds’?
It is considered an executive instrument under Article 667.
What can a cheque bearer do if a cheque is bounced?
- Apply for immediate enforcement in court
- Proceed directly to the execution judge
What is the legal deadline to file a case for a bounced cheque?
Two years from the expiry of the presentment period (total of 2 years & 6 months).
What are the monetary fines for cheque-related offenses?
Minimum 10% of cheque value (min AED 1,000), max full cheque value; double penalty for repeat offenses.
What are the criminal liabilities for cheque-related offenses?
- Instructing the bank not to pay before due date
- Closing account before cheque is cashed
- Intentionally writing an unpayable cheque
What are the corporate liabilities for bounced cheques?
- Corporate fine & penalties
- 6-month business suspension for repeat offenses
- License revocation for repeated violations
What are the key differences between a bill of exchange, promissory note, and cheque?
- Bill of Exchange: Order to pay, three parties, payable on fixed date or demand
- Promissory Note: Promise to pay, two parties, payable on fixed date or demand
- Cheque: Order to pay, three parties, payable on demand
