Article 17 of the Saudi Commercial Papers Law

المادة 17 من نظام الأوراق التجارية · الفصل الثاني: تداول الكمبيالة بالتظهير

Article 17 provides that endorsement transfers all rights arising from the bill of exchange, and bars a defendant from raising against the holder defenses based on their personal relationship with the drawer or earlier holders unless the holder intended to harm the debtor.

Official text (Arabic)

This article has not been amended since the law was issued.

ينقل التظهير جميع الحقوق الناشئة عن الكمبيالة.

وليس لمن أقيمت عليه دعوى بكمبيالة أن يحتج على حاملها بالدفوع المبينة على علاقته الشخصية بساحبها أو بحامليها السابقين ما لم يكن قصد الحامل وقت حصوله على الكمبيالة الإضرار بالمدين.

This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers

Article 17 explained in plain English

This article sets out two basic effects of endorsement:

First effect: transfer of rights. Endorsement transfers all the rights arising from the bill of exchange to the endorsee.

Second effect: personal defenses cannot be raised. A person sued on a bill of exchange cannot raise against its holder defenses based on his or her personal relationship with the drawer or with earlier holders. "Defenses" here means the objections the debtor relies on to refuse payment, for example a dispute between the debtor and the drawer over a deal.

The exception: these defenses may be raised if the holder's intention when obtaining the bill was to harm the debtor.

The rationale of this rule is to protect the person who receives the bill by endorsement, so that he or she can be confident of not being met with disputes between earlier parties that are no concern of his or hers, which makes the bill easier to circulate.

This article follows Article 16, which explains who the lawful holder is. It differs from Article 18, which deals with endorsement for collection, where those bound may raise against the holder the defenses that could be raised against the endorser.

To assess the defenses available in a particular dispute, you can consult a lawyer specializing in commercial cases and commercial papers.

Practical example

A merchant drew a bill of exchange on his customer as the price of goods, then endorsed it to a supplier. Later the customer claimed the goods were defective and refused to pay the supplier. Under Article 17, the customer cannot raise this personal dispute with the merchant against the supplier, unless it is proven that the supplier intended, when obtaining the bill, to harm the customer.

Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.

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