Qatar has introduced key amendments to its Commercial Law, effective April 2024, to address issues related to cheque payments. The new provisions require banks to make partial payments to cheque holders, even if there are insufficient funds in the payer’s account while giving holders the option to decline. Cheque holders will receive documentation for any partial payments, allowing them to pursue the remaining balance. The reforms aim to minimize legal burdens related to bounced cheques, offering a more efficient process for both parties involved in cheque transactions.
In a significant move to address issues related to bounced cheques and protect both payers and holders, Qatar has introduced amendments to its Commercial Law. These changes aim to streamline the handling of cheque payments, especially in cases where there are insufficient funds in the payer’s account. The introduction of Law No. 1 of 2024, which amends the provisions of Qatar’s Commercial Law No. 26 of 2007, brings notable changes to how cheque payments are handled. Published in the Official Gazette on March 7, 2024, these amendments are designed to address challenges in cheque transactions and provide better protection for both the payer and the recipient.
Pursuant to the Amendment, Article 585 of the Commercial Law has been replaced by the following text:
“If the consideration for payment is less than the amount of the cheque, the drawee shall partially pay [the cheque holder] to the extent in his possession, unless the holder refuses. The drawee shall, in the event of partial payment, make a note of each partial payment instance on the back of the cheque to that effect, and give the holder the original cheque and a certificate of such [partial] payment. The holder has the right of recourse in respect of the remaining [unpaid] amount on the basis of the certificate and the original of the cheque marked thereon.”
Key Highlights of the Amendments:
- Partial Payment Requirement:
If the payer’s bank account has insufficient funds to cover the full value of the cheque, the bank (the drawee) is required to make a partial payment to the cheque holder, unless the holder explicitly declines. By default, it is assumed that the cheque holder consents to receive a partial payment unless they notify otherwise.
- Documentation for Partial Payments:
– When a partial payment is made, the bank must document each payment on the back of the cheque to confirm the amount disbursed.
– Additionally, the bank must return the original cheque to the holder, accompanied by a certificate that specifies the amount of the partial payment.
- Rights of the Cheque Holder:
– The cheque holder retains the right to claim the remaining unpaid amount. This can be pursued by using both the certificate issued by the bank and the original cheque, which will reflect the partial payment made.
– This provision allows the cheque holder to seek legal recourse or other remedies for the outstanding balance while acknowledging that part of the debt has been settled.
– Even if a portion of the cheque is paid, the dishonor of the cheque can still lead to legal action for the unpaid portion. It’s important to note that partial payment does not absolve the payer from criminal liability in cases of bounced cheques.
Impact on the Banking and Business Sector
These changes are expected to benefit both businesses and individuals by offering a more balanced approach to cheque payments. For cheque holders, the option of partial payment provides an immediate resolution, while the documentation ensures their legal rights to the remaining amount. On the other hand, payers facing financial shortfalls can avoid more severe legal consequences by making partial payments.
This amendment represents Qatar’s ongoing efforts to modernize its commercial laws and provide a more efficient financial ecosystem, reducing the risks associated with bounced cheques and ensuring smoother financial transactions across the board.
Qatar’s amendments to its Commercial Law mark a proactive step in improving the efficiency and fairness of cheque transactions. By addressing the issues of insufficient funds with a structured approach to partial payments, the reforms benefit both payers and cheque holders, while also streamlining the legal process in cases of bounced cheques. These changes are a clear indication of Qatar’s commitment to fostering a more secure and efficient financial environment.
CMA Mohammed Rajaie
Partner, Tass & Hamjit