Everything You Need to Know About a Bank Cheque in Dubai

Bank cheques play a crucial role in financial transactions in Dubai, but their use requires a thorough understanding of procedures, legal implications, and practical advice. In this article, let’s delve into the workings of cheques in Dubai to ensure smooth financial management.

What is a bank cheque?

A bank cheque is designed to act as a commonly recognized negotiable instrument in lieu of cash. Federal Law No. (18) of 1993, enacting the Commercial Transactions Law, regulates the issuance and circulation of cheques in the United Arab Emirates. Article (483) of the law defines a cheque as “an order issued by a person (the drawer) to a bank (the drawee) to pay, on a specified date (date of issuance), a specific sum of money to the order of a third person (the payee or bearer), being the payee, or the bearer thereof.”

A duly completed and signed cheque gives the bank the authority to disburse the drawer’s money. The bank must pay the cheque even if the drawer opposes it, except in cases of cheque loss or if the bearer goes bankrupt. Therefore, the cheque is effectively an irrevocable payment instrument.

The cheque issuer must be aware that, under the law, a cheque must satisfy the conditions mentioned below.

What does a bank cheque in Dubai look like?

In accordance with Article (598) of the Commercial Transactions Law of the United Arab Emirates, cheques issued and to be paid in the UAE must be drawn on a bank. Each bank provides account holders with chequebooks containing specially printed and highly secure forms – blank cheques. On each cheque, (a) the account owner’s name, (b) their account number, and (c) the cheque serial number must be printed (see the image below).

Reading a cheque composition

In accordance with Article (596) of the Commercial Transactions Law of the United Arab Emirates, a cheque must contain the following details:

The word “cheque” written in the text of the instrument in the language in which the text is written.
An unconditional order to pay a specific sum of money.
The name of the bank that is required to pay (the drawee).
The name of the person to whom or to whose order the payment is to be made (the payee).
The place of payment.
The date and place of issuance of the cheque.
The signature of the person who issued the cheque (the drawer).

The law does not stipulate that the absence of a date will render a cheque invalid. Thus, if the date is omitted, the date of presenting the cheque for payment will be considered its date of issuance.

In the absence of an indication of the place of payment on the cheque, the place mentioned next to the name of the bank will be presumed to be the place of payment; and if not specified at all, it will be the head office of the bank. Similarly, if the place of issuance is not specified, the cheque will be deemed to have been issued at the place where it was actually signed (Article (597)).

Ensure fund availability

Adhering to the laws and principles of good faith (Bona Fides), the drawer must bear in mind that they cannot issue a cheque knowingly if they know they do not have, or will not have, sufficient funds in their account with the drawee on the date of issuance. The drawer is required to deposit adequate funds to fully cover the amount stated on the cheque, in accordance with Article (599). Failure to provide such funds, whether partially or entirely, grants the payee the right to request a statement from the drawee (the bank) for use as evidence in any action they intend to take against the drawer.

Beware of insufficient funds cheques?

An insufficient funds cheque, also known as a ‘bounced cheque’ or ‘unfunded cheque,’ is a cheque presented by the payee and rejected by the drawee bank in cases such as:

When the bank indicates that the funds available in the drawer’s account on the date of issuance are insufficient to cover the amount mentioned on the cheque, either partially or in full; the cheque is thus rejected and annotated by the bank.
When the bank receives an order from the issuer not to pay the cheque.
When the drawer makes or signs the cheque in a manner that prevents it from being paid, such as omitting or altering their signature.
When the drawer’s bank account is closed before the issued cheque is presented for payment.

More reading: 2023: Insufficient funds cheques in the United Arab Emirates

When exploring the world of cheques in Dubai, it is essential to have a deep understanding of legal procedures, sanctions, and practical advice. Opt for an informed approach to maximize the benefits of this financial instrument while avoiding unnecessary complications.