Category: Contract Law

Bounced Cheque Dubai UAE Law

Is Bounced Cheque a Criminal Case in UAE?

A bounced cheque which is also known as a dishonored or returned cheque is a non-sufficient funds cheque that cannot be processed because of the following reasons:

  • There is not enough money in the account of the drawer on the date the cheque was issued.
  • The bank account had closed prior to the encashment of the cheque.
  • There is a technical problem such as a mismatch in the signature on the cheque and the signature in the bank’s records.
  • The account holder instructed the bank to hold the payment.

The UAE has its set of repercussions for cases of bounced cheques and criminal charges are strictly imposed on people who present a cheque with insufficient funds or with full knowledge that it will not be cleared.

According to Article 632 of the Commercial Transaction Law, in the event of a default in the processing of a cheque due to any of the reasons stated above, a period of 3 days may be given to the cheque bearer to contact the drawer for the possibility of funding the cheque. Should the drawer be unavailable for communication within the given period, the drawee or cheque bearer has the right to take legal action. In such a case, the drawee can file a criminal complaint about the bounced cheque along with a civil case for the recovery of the cheque amount. The civil case will provide the drawee with an assurance that the amount denied will be recovered.

The process of filing a legal case against a drawer can go through several stages and the ramifications of a dishonored cheque may vary depending on the response of the drawer and the evidences provided.

  1. Police Authority

A complaint on a bounced cheque may be initially reported to the nearest police station located in the concerned Emirate. This requires presentation of relevant documents and evidences. The police authority will automatically issue a warrant of arrest against the drawer. The drawer can respond by settling the case or submitting his passport so that further time may be given for him to provide the amount required. The warrant can be withdrawn after the drawer clears the matter or serves the jail time prescribed.

  1. Public Prosecutor

The case will be forwarded to the Public Prosecutor for further investigations if the parties fail to resolve it at the police station. A report shall be prepared based on the proof provided. To give security to the drawee, the prosecutors can either hold the passport of the drawer or the guarantor or require a payment corresponding to the estimated amount of the cheque. The drawer will be kept in custody until the issuance of the final decision if the bail is denied.

  1. Criminal Court

At the criminal court, the drawer may be convicted based on the evidence provided by the drawee. According to Article 401 of the UAE Penal Code, the punishment can either be a fine ranging from AED 1,000 up to AED 30,000 or imprisonment from one to three years.

There have been recent advancements where the government has stipulated laws to address small claims or petty offences. Such laws, enacted through the “One-day court”, allow small cases of bounced cheques to be given a decision within 24 hours and resolved with a detention sentence. This is now in force in Abu Dhabi, Dubai and Ras Al Khaimah and the effectivity in reducing the number of cases processed at the Criminal Courts has been observed. As a result, serious cases have better chances of getting resolved faster as the Criminal Courts now have enough time to deal with them.

In addition, Dubai has come up with a law on “Criminal Orders”, which allows the Public Prosecution to resolve “simple violations” with monetary penalty. The matter will only be transferred to Criminal Courts if there is an objection to the sentence issued and the objection is documented within 7 days of the issuance of the verdict.

An issued cheque worth AED 200,000 and below is classified as a simple offence and will be given a penalty of about AED 5,000 – AED 10,000. This is not punishable by imprisonment in Dubai. Thus, lawyers often advise their clients that when receiving cheques, it would be better if they require an amount higher than AED 200,000 so that in the event of a dishonored cheque, the drawer will be bound to face imprisonment. With such possible punishment, there will be a lesser chance of the drawer not funding the cheque.

If you have received a bounced cheque and would like to know the next steps in getting your investment back, Call Us Today!

Bounced Cheque Law Dubai UAE

Bounced Cheque in Dubai UAE – What you need to know

Rules and Regulations of Bounced Cheque Law in Dubai UAE.

Bank cheque is a tool used by individuals to secure funds, contract business and pay obligations, but not all of them have the ability to fund these cheques and the volume of bounced cheque cases have sky-rocketed over the years.

To address this ever-growing state of affairs, the UAE Government has established a set of rules to guide both the issuer and the recipient of Bounced Cheque.

There are several UAE Laws that can be utilized to protect the recipient of Bounced Cheque and they can be done either in the criminal or civil court. The recipient can file a complaint in the police station against the issuer and the case will be forwarded to the public prosecution and then to the criminal court (under the new rules, the public prosecution, in an effort to adjust with the volume of cases with low-value claims, can now issue criminal orders to sentence offenders of low-value bounced cheque to pay fines rather than endure jail time).

According to a recent study, the UAE Public Prosecution categorized low-value cases like the ones where the bounced cheque amounts less than AED 200,000 hence the only issuer of cheques with an amount more than AED 200,000 are doomed to be sentenced with a jail term.

The recipient can also institute a civil action against the issuer for the amount of the bounced cheque and if the issuer cannot pay the amount, he can be imprisoned for a period corresponding to the unpaid amount.

As for the issuers, particularly for low-value cheques, they can avoid imprisonment by simply paying the fine corresponding to the cheque amount; however, this does not absolve them from paying the obligation when the recipient opted to institute a civil action to collect the amount due through a debt collection service.

For more detailed discussion of the intricacies of the Bounced Cheque Law in the UAE, you may contact Al Reyami Advocates and Muhyealdeen International Legal Consultants.

For Free Legal Consultation, Call Us Today!

bounce cheque law in dubai

Bounced Cheque in UAE

A bounced cheque is considered a crime in UAE and as per new rules instead of jail term there will be fines issued considering bounced cheque as a misdemeanor on the following basis,

– There is no date mentioned
– It is not signed by the drawer
– Does not clearly state the word “cheque”
– Does not specify the amount issued
– If it does not mention drawer and the beneficiary name

The new rule states that a bounced cheque of upto 50,000 will be given a fine of aed 2,000, for cheque between 50,000 to 100,000 will be given a fine of aed 5,000 and lastly for cheque between 100,000 to 200,000 will be given aed 10,000 fine.

A postdated cheque is not considered a crime. However, the cheque will be invalid if the date is not incorporated on the cheque or it contains fake duplicate signature or any sort of mark.

Please note that a bounced cheque crime may not be intentional but still the offence takes place once the cheque has been presented.

If you have received a bounced cheque and want to have your investment back, our debt collection lawyers are available to assist you in recovering your funds/assets.

For Free Legal Consultation, Call Us Today!

personal guarantee in dubai

Personal Guarantee in the UAE

Personal Guarantee in the UAE | Guarantors of Loans and Travel Bans

A personal guarantee is the legal promise to pay an amount of debt by for which that person will be held responsible in the event they are unable to pay the amount.

Implementation of Shariah law has lead to UAE Laws on personal guarantee being amended and as per Article 1068 as follows,

  • A guarantee given by a guarantor compels him or her to meet their obligation to the guaranteed person on time and, if failing to do so can incur a fine issued by a competent judge.
  • In case of a penal sentence (jail term) being issued in relation to failure to meet a personal guarantee, the guarantor may be compelled to pay a specified amount in addition.

The increase in trade due to the strong economic growth in the UAE has resulted in a higher number of transactions which require quick debt collection method to be adapted.

The most common mode used by institutions and traders is the post-dated or undated cheque which is fast and safe as compared to other methods.

For Free Legal Consultation, Call Us Today!

vat law in dubai

Construction contracts and VAT?

Construction Contract and Introduction to VAT in Dubai UAE

The introduction of VAT scheduled for January 2018 is going to have an impact on construction and consultancy contracts already in place and will be a pertinent point for consideration in new contracts being drawn up in the UAE. Those well ahead of the game may have already included articles to deal with the direct and indirect costs associated with VAT but it is highly likely that a great number have not. For those that have not included such clauses, the additional costs will most probably have to be absorbed under the existing payment terms which will have a knock-on effect to profitability. Those that have included the relevant clause will have the ability to add these costs over and above the contract rates or will at the very least have the grounds to take effective action to do so. As the time for implementation is fast approaching, having your contracts reviewed is something not to be put off any longer.

For many contracts across the construction sector in the UAE, the FIDIC standard forms are commonly used, particularly the FIDIC Conditions of Contract for Construction 1999 (Red Book). The Red Book specifically states that the contractor is obliged to pay all taxes as required under the law hence the contract price is understood to include such taxes based on the applicable rates in force at the ‘Base Date.’ That being said, there are also sections in the same book that state a contractor is able to claim additional costs that arise as a result from a change in the laws of the country where the works are being carried out.

Clause 14.1 (b) of the General Conditions of the Red Book states:

“the Contractor shall pay all taxes, duties and fees required to be paid by him under the Contract and the Contract Price shall not be adjusted for any of these costs except as stated in Sub-clause 13.7 [Adjustments for Changes in Legislation].

Clause 13.7 of the General Conditions the Red Book helpfully provides,

“The Contract Price shall be adjusted to take account of any increase or decrease in Cost resulting from a change in the Laws of the Country (including the introduction of new Laws and the repeal or modification of existing Laws) or in the judicial or official government interpretation of such Laws, made after the Base Date, which affect the Contractor in the performance of obligations under the Contract.”

The Base Date is defined as “the date 28 days prior to the latest date for submission of the Tender.”

What is particularly important to note is that Clause 14.1 includes the phrase “Unless otherwise stated in the Particular Conditions…” That translates to mean if the conditions do not impact clause 14.1 (b) or clause 13.7, a contractor may be permitted to claim amendments to the Contract Price because of the introduction of VAT. For a contractor to make such a claim for extension of time and/ or costs, the contractor should consider the notice requirements under clause 13.7. When looking carefully at additional conditions you should also be wary of sub clause 13.8 which refers to Adjustments for changes in cost and whether such a claim for changed costs has already been dealt with to ensure such a change is not doubly applied.

This standard clause is not included in contracts for Dubai Municipality and the costs of VAT will need to be absorbed in the contract price.

Construction contracts post January 2018
It is safe to conclude that the introduction of VAT will have an impact on the contract price of construction contracts. Specifying whether VAT is to be paid on top of the tender price or if it is included in the Contract Price will be necessary to avoid any misunderstanding or confusion.

For Free Legal Consultation, Call Us Today!

breach of trust law in dubai

Breach of Trust (UAE)

Contract Laws and Breach of Trust in the UAE

UAE contract laws state that any action that goes against the implicit trust granted by an agreement between the trustor (the person giving the trust) and the trustee (the person entrusted) is known as breach of trust.

For a breach of trust to have taken place, some specific elements should exist.

1- The person in breach must obtain possession of an object either on the basis of trust, usage, lease or mortgage for breach of trust to happen

2- A breach of trust can only apply to a moveable object such as money or a document.

3. To be classed as a breach of trust, the object in question needs to be obtained, damages or wasted or lost without proper authority having been granted. This is a specific difference to theft or fraud as an actual physical damage must be suffered.

4- Where a shareholder prevents other shareholders from exercising their rights for personal gain, a clear breach of trust exists.

business dispute law in dubai

Business Disputes in the UAE

Business Lawyers in Dubai | Contact Lawyers for Business Disputes in UAE

Commercial disputes between companies, companies and customers or even between partners can cause a great deal of distress. They can also , in some instances lead to loss of valuable time, lost business and even bring about the collapse of a business venture in its entirety. Generally, amicable settlement of such a dispute would be beneficial to all parties in its speed and efficiency, even when at times it feels like a compromise you may not want to make. Understanding the ‘bigger picture’ and the potential damage of a protracted dispute is often much clearer in hindsight (when it’s too late). To that end, below is the list of top tips to help resolve a dispute:

a) Gather as much evidence as you can through witness statements in the initial stages; don’t forget, the people involved may be expats and may not be around later to provide the supporting evidence required. Such evidence is useful in determining the events of a situation but may not be necessarily favored for use in court where evidence of fact carries more weight (contracts and breaches of contract terms). Such evidence though is very useful in assisting your legal counsel to effectively drafting each memorandum (the submissions made to court for a case).

b) Try to negotiate with the other party/parties and have a strategy for what you would like to achieve from the discussions. If in your communications a response is requested by email within a certain period, try and follow that to avoid adding complications to the situation that detract from the main issues. Stay on topic. You are attempting to resolve the situation rather than create new arguments or debates.

c) The dispute should be managed by one person from the company, as the central point of contact and the person responsible for taking the required actions. This helps reduce the risk of contradiction or confusion that can easily come about from the different interpretations of the same information that are often present. This also helps to keep the correct focus on what you are looking to achieve and will assist with a clear and clean hand-over to your lawyers should they need to become involved.

d) If you need to extract evidence from a company asset (computer, laptop or smart phone for example) it is advisable to seek professional help to recover it. This limits the risk of not only losing the information but also the risk of suggesting the information has been manipulated or tampered with.

e) It seems an obvious point but one that is all too frequently ignored. Always read and understand every element of a document before you sign your name to it (particularly if it is not in your first language). By signing, you are agreeing to the content which may bind you personally and or the company you represent to actions and liabilities.

f) Although many legal documents in the UAE will have this phrase as a point of ‘best practice’, it does not carry the same legal authority in the UAE system. Without Prejudice is used in negotiations in other countries to ensure concessions made or information shared during negotiation cannot be used against you if a case goes to court as specific evidence. It can be used against you in the UAE regardless of whether the term was used.

g) UAE law favors documentary proof over and above oral (spoken) statements. There is no dramatic court room cross examination as seen in the movies, cases in the UAE are largely fought to a written strategy where the power, structure and content of the legal argument in writing will have the biggest influence on the outcome.

h) When terminating a contract, seek professional legal advice. There are often elements that can remain open for interpretation or action should this not be done in a way that actually closes the contract obligations between the parties. Obvious examples would include specified warranty periods or retention payments that may exist after the contact termination.

i) If you are going to need the support of good lawyers, get them involved as early as possible. Experience in dealing with these matters can avoid costly delays and the possibility of saying or writing the wrong thing that can alter the course of the negotiation and impact the liability to which a party is held. Delaying can also cost you more as there may be significant extra work to repair the damage done before bringing in the experts.