Article 98 of the Saudi Commercial Papers Law
المادة 98 من نظام الأوراق التجارية · الفصل الثاني: تداول الشيك
The Article says a check payable to a named person circulates by endorsement unless marked not to order, in which case it passes by assignment of the right, and regulates endorsement to the drawer and the drawee.
Official text (Arabic)
This article has not been amended since the law was issued.
الشيك المشروط دفعه إلى شخص معين سواء نص فيه صراحة على شرط الأمر أو لم ينص عليه يكون قابلا للتداول بطريق التظهير.
والشيك المشروط دفعه إلى شخص معين والمكتوبة فيه عبارة (ليس لأمر) أو أية عبارة أخرى مماثلة لا يجوز تداوله إلا باتباع أحكام حوالة الحق.
ويجوز التظهير ولو للساحب أو لأي ملتزم آخر، ويجوز لهؤلاء تظهير الشيك من جديد، ويعتبر التظهير إلى المسحوب عليه بمثابة مخالصة، إلا إذا كان للمسحوب عليه عدة منشآت وحصل التظهير لمصلحة منشأة غير التي سحب عليها الشيك.
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 98 explained in plain English
This Article deals with how a registered check circulates, meaning one payable to a named person, and distinguishes two cases:
- A check payable to a named person, with or without the order clause: it is transferable by endorsement, meaning writing on it to transfer it to another person.
- A check payable to a named person with the words "not to order" or similar words written on it: it may be transferred only in accordance with the rules on assignment of a right, and does not pass by endorsement.
The Article then sets special rules for the person to whom the check is endorsed:
- Endorsement is permitted even to the drawer or to any other party liable on the check, and they may endorse it again.
- Endorsement to the drawee operates as a receipt, unless the drawee has several establishments and the endorsement was made in favor of an establishment other than the one on which the check was drawn.
This Article is linked to Article 97, which makes the drawer guarantor of payment of the check, and is complemented by Article 99, which regulates circulation of a bearer check by mere delivery. Anyone wishing to know the effects of endorsing a particular check would do well to consult a lawyer who specializes in commercial matters and commercial papers.
Practical example
An establishment in Khobar received a check in its own name from one of its customers, then endorsed it to a supplier by writing the transfer on the check. This is permitted under the Article because the check is payable to a named person and does not say "not to order".
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 98 of the Saudi Commercial Papers Law
May a check written in a person's name be endorsed?
Yes. A check payable to a named person is transferable by endorsement, whether or not the order clause is stated in it.
How is a check marked "not to order" transferred?
It may be transferred only in accordance with the rules on assignment of a right.
What is the effect of endorsing a check to the drawee bank?
It operates as a receipt, unless the drawee has several establishments and the endorsement was made in favor of an establishment other than the one on which the check was drawn.
More articles on Endorsing Commercial Papers
- Article 12
Article 12 allows a bill of exchange to be transferred by endorsement even if not expressly drawn to order, bars endorsement where the drawer writes "not to order", and permits endorsement to the drawee, the drawer or any other obligor.
يجوز تداول الكمبيالة بالتظهير ولو لم يذكر فيها صراحة إنها مسحوبة (لا أمر). ولا يجوز تداول الكمبيالة التي يضع فيها ساحبها عبارة (ليست لأمر) أو أية عبارة مماثلة إ
- Article 13
Article 13 requires an endorsement to be free of any condition, treats a condition attached to it as if not written, makes a partial endorsement void, and treats an endorsement to bearer as a blank endorsement.
يجب أن يكون التظهير خاليا من كل شرط، وكل شرط علق عليه التظهير يعتبر كأن لم يكن. والتظهير الجزئي باطل. ويعتبر التظهير للحامل تظهيرا على بياض.
- Article 14
Article 14 sets out how an endorsement is written on a bill of exchange or an attached paper and signed by the endorser, permits a blank endorsement, and states the holder's options in that case.
يكتب التظهير على الكمبيالة ذاتها أو على ورقة أخرى متصلة بها ويوقعه المظهر. ويجوز ألا يكتب في التظهير اسم المظهر إليه ، كما يجوز أن يقتصر التظهير على توقيع المظه
- Article 15
Article 15 makes the endorser guarantee acceptance and payment of the bill of exchange unless otherwise stipulated, and lets the endorser prohibit re-endorsement, in which case the endorser does not guarantee to those who receive the bill by a later endorsement.
يضمن المظهر قبول الكمبيالة ووفائها ما لم يشترط غير ذلك. ويجوز له حظر تظهيرها من جديد، وفي هذه الحالة لا يكون ملزما بالضمان لمن تؤول إليهم الكمبيالة بتظهير لاحق.
- Article 16
Article 16 treats the possessor of a bill of exchange as its lawful holder if they prove their right by an unbroken series of endorsements, and protects a holder from having to give up a lost bill unless they obtained it in bad faith or by gross fault.
يعتبر حائز الكمبيالة حاملها الشرعي متى أثبت أنه صاحب الحق فيها بتظهيرات غير منقطعة ولو كان آخرها تظهيرا على بياض. والتظهيرات المشطوبة تعتبر في هذا الشأن كأن لم
- Article 17
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.
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 الساب
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.