Article 31 of the Saudi Commercial Papers Law
المادة 31 من نظام الأوراق التجارية · الفصل الرابع: مقابل الوفاء
Article 31 passes ownership of the funds for payment of a bill of exchange by operation of law to its successive holders, and gives the holder the same rights even if the funds are less than the value of the bill.
Official text (Arabic)
This article has not been amended since the law was issued.
تنتقل ملكية مقابل الوفاء بحكم النظام إلى حملة الكمبيالة المتعاقبين. وإذا كان مقابل الوفاء أقل من قيمة الكمبيالة كان للحامل على هذا المقابل الناقص جميع الحقوق المقررة له على المقابل الكامل.
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 31 explained in plain English
"Funds for payment" are the money the drawer has with the drawee, from which the bill of exchange is expected to be paid. Article 30 explains that they are considered to exist if, on the due date, the drawee owes the drawer or the person who ordered the drawing a specified, payable sum of money at least equal to the amount of the bill.
Article 31 sets out two rules:
- Transfer of ownership by operation of law: ownership of the funds for payment passes to each successive holder of the bill, so the holder needs no separate agreement or special procedure to become the owner of the right to those funds.
- Insufficient funds: if the funds for payment are less than the value of the bill, the holder has over this insufficient amount all the rights he or she would have had if the funds were complete.
Thus the holder's right is tied to the funds held by the drawee, however many people circulated the bill before him or her. Article 32 complements this rule by setting the order of holders where several bills falling due on the same date compete for funds for payment that are not enough for all of them.
Because the existence and amount of the funds may be disputed between the parties, it is advisable in a dispute to consult a lawyer specializing in commercial cases and commercial papers.
Practical example
An establishment in Jeddah drew a bill of exchange for SAR 100,000 on a merchant in Riyadh who owed it money, and the beneficiary then endorsed it to a supplier. On the due date it turned out that the merchant's debt to the establishment was only SAR 70,000. Under Article 31, ownership of these funds passes to the supplier as holder of the bill, and he has over the SAR 70,000 all the rights he would have had if the funds were complete.
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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Frequently asked questions about Article 31 of the Saudi Commercial Papers Law
What are funds for payment of a bill of exchange?
They are a specified, payable cash debt owed by the drawee to the drawer or the person who ordered the drawing on the due date, at least equal to the amount of the bill, as Article 30 explains.
Does the holder of a bill need a special procedure to own the funds for payment?
No, Article 31 provides that ownership of the funds passes to the successive holders of the bill by operation of law.
What if the funds for payment are less than the amount of the bill?
The holder has over this insufficient amount all the rights he or she would have over the full funds.
More articles on Bill of Exchange
- Article 1
The article sets out the eight particulars a bill of exchange must contain, including the word "bill of exchange", the amount, the name of the drawee, the due date and the drawer's signature.
تشتمل الكمبيالة على البيانات الآتية: أ - كلمة (كمبيالة) مكتوبة في متن الصك وباللغة التي كتب بها. ب - أمر غير معلق على شرط بوفاء مبلغ معين من النقود. ج - اسم من
- Article 2
An instrument lacking the particulars of Article 1 is not a bill of exchange, except where the due date, place of payment, drawee's domicile or place of issue is missing, each of which has a substitute rule.
لا يعتبر الصك الخالي من البيانات المذكورة في المادة السابقة كمبيالة إلا في الأحوال الآتية: أ - إذا خلت الكمبيالة من بيان ميعاد الاستحقاق، اعتبرت مستحقة الوفاء ل
- Article 3
The article permits three ways of drawing a bill of exchange: to the drawer's own order, on the drawer himself, or for the account of another person.
يجوز سحب الكمبيالة لأمر الساحب نفسه، ويجوز سحبها على ساحبها، ويجوز سحبها لحساب شخص آخر.
- Article 4
The article permits stipulating that a bill of exchange be paid at the domicile of a person other than the drawee, whether in the drawee's town or in another.
يجوز اشتراط وفاء الكمبيالة في موطن شخص آخر غير المسحوب عليه سواء كان هذا الموطن في الجهة التي فيها موطن المسحوب عليه أو في جهة أخرى.
- Article 5
If the amount of a bill written in words differs from the amount in figures, the words prevail; if the amount is written several times and differs, the smaller amount prevails.
إذا كتب مبلغ الكمبيالة بالحروف وبالأرقام معا فتكون العبرة عند الاختلاف بالمكتوب بالحروف، وإذا كتب المبلغ عدة مرات بالحروف أو بالأرقام فتكون العبرة عند الاختلاف
- Article 6
Article 6 provides that any stipulation of interest on the amount of a bill of exchange is treated as if it had not been written.
اشتراط فائدة الكمبيالة يعتبر كأن لم يكن.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.