3. Why we worry about a cheque?
A cheque is a property. Is it movable property other else?
Article 1128- 2. Securities to bearer- Civil Code
Unless otherwise provided by law,claims and other incorporeal’ rights embodied in securities to bearer shall be
deemed to be corporeal chattels.
As per this article, a cheque is considered as movable property. Despite the fact that it is movable
property, a cheque has unique features which distinguishes from another categories of movable
properties.
A high value transaction is transferred via a cheque with out any vessel which would be very
difficult if hard cash was used instead. This transaction has to be handled very delicately as it may
lead to some serious banking fruads. This is why a cheque as a commercial instrument needs a
special attention in our law.
4. Rules
1. Commercial Code of Ethiopia, Proclamation No. 166/1960 – articles 827-886
2. ChequeAccount Operation Directive, Directive No. 64/2016
3. Federal Supreme Court Cassation Bench Decisions Concerning Cheques
4. Criminal Code of Ethiopia, Proclamation No 414/2004,Article 693
5. Definition
How the Ethiopian laws define a cheque?
Article 2.2 of the Cheque Account Operation Directive, Directive No. 64/2016
states that “cheque means the meaning ascribed to it under the commercial code of
Ethiopia.” However, the commercial does not define what is meant by a cheque.
Shall we borrow definitions given in on other jurisdiction?
The English Bills of Exchange Act of 1882 defines a cheque as an unconditional order
in writing addressed by one person to another, who must be a banker, signed by the
person giving it, requiring the banker to pay on demand a sum certain in money to or
to the order of a specified person or to bearer.
From the close reading of provisions of the commercial code and cheque account
operation directive No. 64/2016, one can deduce the following definitions for the
term cheque.
6. Cont.
A Cheque is a commercial paper issued by a bank account holder ( the account should be
current account) to make payments and to withdraw cash from the bank. One of the
benefits of Cheque is that you can transfer a high value transaction without any hassle
which would be very difficult if hard cash was used instead.
A cheque is a commercial instrument drawn on a specified bank and not expressed to be
payable otherwise than on demand and it includes the electronic image of a truncated
cheque and a cheque in the electronic form.
Cheque is an order to a darwee (a bank) to pay a stated sum to the payee from the
drawer's account ( current account), written on a specially printed form.
7. Who is allowed to draw a cheque? Article 4 of the cheque account
operation directive
8. Application to obtain a cheque book
See for example, an application format issued by the commercial bank of Ethiopia
9. Prerequisite for Drawing a Cheque
The drawe must have a current account in the bank ( drawee) to which it is connected. A
cheque account operation directive No 64/2016
There should have prior sufficient funds in the disposable/current account of the drawer at
the time of maturity date of the cheque.Article 830 of the commercial code
Requirements of a Cheque
Article 827 of the code provides the particulars that has to be included in a cheque. Accordingly, a
cheque shall fulfill the following requirements.
1.An unconditional order to pay a sum certain in money. This means that there must be an
imperative order to pay a certain money. Thus, if a cheque is payable on contingency, it cannot be
a cheque under the Ethiopian commercial law. The amount of sum has to be stated in words and
figures.Articles 827 (a)+ 837 (1) of the commercial code
10. Cont.
Where the amount of a oheque is expressed both in words and figures and there is a discrepancy,
the amount expressed in words shall be paid.Article 837 (1)
What if there is repetition in expressing the amount of money ( the sum money is written more
than once)?- it does not affect the validity of the cheque?
2.The name of the person who is to pay drawee ( it is always a bank)- see article 829.Thus,the name of
the bank which is to pay should be stated in the cheque to be considered a valid cheque. Should
the name of the branch be written?Why the name of recipient ( payee) is not made a valid
requirement under the Ethiopian law?What is the effect is a cheque missing the name of the
recipient ( payee)? It is s considered as bearer cheque.Article 833 (3) of the commercial code
3.The place of payment of a cheque-
11. Cont.
4.The date when and the place where the cheque is drawn.
5.The signature of the drawer-Article 827 (e) +734 of the commercial code
What if the drawer (if physical person) is unable to sign ?- should be verified by an
authentic declaration to bind that person.Article 734 ( 3) of the commercial code
Signature of the drawer can be of two types. Either hard written mark or tamp. Article
734 (2) of the commercial code
Can signature be made by someone authorized to sign on the behalf of the drawer ? See
your course on law of agency. How do you see it with articles 838 and 839 of the
commercial code?
How issue of interest is regulated under the commercial code? The Amharic of version of
Art 836 expressly excludes stipulation of interest on a cheque. Such stipulation is absent in
the English version.
12. Requirements absent and their remedy – Article 828
If the elements stated in articles 827(c) happens to be missing ( where the place of payment is not
mentioned), article 828 provides that:
a) Unless otherwise expressly provided the place mentioned under the name of the drawee shall
be deemed to be the place of payment. If several places are mentioned under the name of the
drawee, the cheque shall be payable at the first place mentioned. Since the drawee is always a
Bank, one can say that the Branch indicated under the name of Bank is the place of payment
b) In the absence of these statements, and of any other indication, the cheque shall be payable at
the place where the drawee has his principal establishment.
Thus, a cheque may not be invalidated by a reason that it does not specify the place where it is
payable.
13. Parties to the Cheque
There are three parties to a cheque transaction, namely;
1. Drawer - account holder who signs on a cheque giving an order to his/her bank to pay
the amount specified therein to a payee using funds in his/her cheque account maintained
in the bank. Article 2.8 of the cheque account operation directive Thus, drawer is the party
by whom or by whose authority the cheque is signed. The term “ by whose authority…”
refers that the cheque is issued by a legal person.
(2) Drawee- the party authorized to pay out the money, that is, the bank. Article 829 of
the commercial code states that “a cheque may only be drawn on a banker or on an institution or
establishment regarded by law as a banker.”Which institutions are regarded as a bank by law?
(3) Payee- the party to whom or to whose order the money is to be paid
14. Types of Cheque
1. Bearer Cheque-
A cheque which is payable to any person who presents it for payment at the bank
counter is called„bearer cheque‟.
A bearer cheque can be transferred by mere delivery and requires no endorsement.
Articles 833 (1c), 721 of the commercial code
A cheque which does not specify the payee shall be deemed to be bearer cheque -
Article 833 (3) of the commercial code
A cheque Made payable to a specified person with words “or to bearer” or any similar
words shall be deemed to be bearer cheque.-Article 833 (2).
Note that a bearer cheque is exposed to theft.
15. 2. Order Cheque
An order cheque is one which is payable to a particular person.
A cheque payable to a specified person with or with out express clause “ to order” Article 833
(1a) of the commercial code
A cheque payable to a specified person with a clause “ not to order” or any similar cluase.
Article 833 (1b) +article 842 (2)
The payee can transfer an order cheque to someone else by signing on the back of the cheque
which is called endorsement.Articles 724 (1) and 842 (1) of the commercial code
Instruments to order may be transferred by endorsement, followed by delivery of the
instrument to the beneficiary under the transfer.Article 724 (1) of the code
How many times endorsement is allowed? The code has not set any limitation on the number
times to endorse or endorse the cheque.Article 842 (3) of the code
16. Endorsement as a means to negotiate an order cheque
What is endorsement?- It the act of the endorser to sign on the face or back of the cheque and
delivers for beneficiary. Thus, endorsement is a means through which an order cheque is
negotiated ( transferred).
Elements of Endorsement ( article 843)
An endorsement shall be unconditional. Conditional endorsement is not recognized under
the Ethiopian law.
A partial endorsement or an endorsement by the bank ( drawee) shall be null and void.
An endorsement “to bearer” is equivalent to an endorsement in blank. Article 843 (3)+ 845
(2)+ article 844 (2) of the commercial code
Note that a blank endorsement converts an order cheque in to a bearer cheque.
What the law maker wants to convey under article 843 (4) of the commercial code?
17. Forms of Endorsement and its Effect ( Articles 844+725)
Be in writing and signed by endorser.
Blank endorsement (endorsing with out mentioning the name of the beneficiary) is allowed
Endorsement may be made by signing on the face or back of cheque or on allonge
What the law maker wants to convey by inserting the second limp of article 844 (2) of the
commercial code which states that “in the later case the endorsement to be valid shall be written
on the back of the cheque or on the slip attached thereto ( allonge)”? The Amharic version of the
article states that “የጀርባው ፊርማ ተጠቃሚውን ሳይጠራ ወይም በጀርባ በሚጽፈው ሰው
ፊርማ ብቻ ለመሆን ይችላል። ( ስም ሳይሞላ መፈረም)፡ የዚህ መጨረሻ ፊርማ ዋጋ ያለው
እንዲሆን በቼኩ ጀርባ ወይም በተያያዘው አንድ ቅጥል ወረቀት ላይ መጻፍ አለበት።”
Note: in the case of blank endorsement, the endorser shall not endorse by signing on the face of
the cheque. He is required to sign on the back of the cheque or on a slip affixed thereof.
18. Effect of Endorsement ( articles 845+846 (2)+847)
All rights in the cheque will be transferred to the beneficiary.
The endorsee may prohibit further endorsement to avoid liability arising from subsequent
endorsement – article 846 (2)
The holder establishes an entitlement – article 847. what if there is dispossession as per article
848 of the commercial code?
What is the effect of bearer endorsement or endorsement in blank ? Article 845 (2)- The holder
of the cheque ( endorsee) has wider right to
Charge either his name or the name another
Reendorse in blank or to order
Deliver the cheque to somebody else with out filling up the blank and without endorsing it.
What if the bank refuses to pay beneficiary? The endorser guarantees payment in the absence of
otherwise agreement.Article 846 of the commercial code
19. Cont.
How do you compromise article 727 with article 846 (1) of the commercial code?
Article 846 (1) of the commercial code states that “Unless otherwise expressly provided, the
endorser guarantees payment.” whereas article 727 of the same codes provides that “Unless
otherwise provided by law or by the instrument, the endorser shall not be liable where the person
issuing the instrument fails to carry out his obligations.”
A bearer cheque could not be changed to order cheque even if it is endorsed by the endorser.
However, the endorser will be liable for non payment.Article 848 of the code
Why a person endorses bearer cheque where he/she can transfer the cheque by a simple delivery
as it provided under 721 (2) of the commercial code?
Concerning conversion, article 720 (1) of the commercial code allowed the conversion of bearer
cheque in to order cheque by the request and expense of the holder.
20. Types of Endorsement of a cheque
Restrictive endorsement –article 851
Blank endorsement- where the endorsement leaves the beneficiary unspecified or may consist simply of
the signature of the endorser.Article 844 (2)
Special endorsement – article 845 (2b)
Unconditional Endorsement- Articles 725 (4) + 844 of the code.
Qualified Endorsement – an endorsement where any endorser can negate or limit his liability to
subsequent holders. Do you think this types of endorsement is recognized in Ethiopia? How do you see
article 746 (2) of the commercial code
What is the obligation of the bank in relation to the confirmation of the signature of endorsee?
Article 860 of the commercial code states that “the drawee who pays an endorsable cheque shall not bound
to verify the signature of the endorsers and shall only verify the signature of the drawer and of the last
endorsee.”
How the bank verify the signature of the last endorsee in the absence of a sample signature of the last
endorsee against which he can compare the signature of such a person affixed on the check?
21. 3. Crossed Cheque –articles 863-866
It is dangerous to issue bearer cheque due to the risk of theft. This risk can be avoided by
issuing another types of cheque called crossed cheque. A crossed cheque a types of
cheque on the face of which two transverse parallel lines have been drawn with or
without certain words in them.Article 863 (3) of the commercial code.
Crossings of cheque are of two types: general crossing and special crossing.Article 863 (2)
A. General crossing: It is a crossing which consists of two transverse parallel lines
across the face of the cheque. In between the line certain additional words like "banker"
or some equivalent term may be written or it may be left without any additional word.
article 863 (3) of the commercial code.
B. Special crossing: when inside the two transverse parallel lines across the face of a
cheque, the name of a particular bank is written.Article 863 (3)
22. Cont.
Who is allowed to cross a cheque?- A cheque can be crossed by the drawer or by any subsequent.
Article 863 (1). No restriction is imposed here. A general crossing can be turned into a special
crossing, but a special crossing may not be converted into a general crossing.Article 863 (4)
What is the purpose of crossing? Crossing is mainly used to safeguard the cheque against theft,
fraud and other tampering. A crossed cheque becomes much safer than an open or uncrossed
cheque. Even if it is lost by the payee, he does not stand to lose anything because the finger can not
collect the amount at the counter unless he has an account in the drawee bank that was named in
the special crossing.
The drawer or holder of a cheque may prohibit negotiability of the cheque by inserting in between
the line words “not negotiable”. The effect of inserting such word is that the holder may not
negotiate the cheque.Article 865 of the commercial code.
23. What are the legal effects of crossing?
A cheque crossed generally can only be paid to a bank, which is the bank of the payee or
holder, or to a person who is the customer of the drawee. Article 864 (1)
If the payee or holder of a generally crossed cheque is not a customer of the drawee bank
or does not have a bank account in any bank, he must hand it over to a friend or relation
who has a bank account will be credited with the amount of the cheque.
A check crossed specially can only be paid to the bank specified in the crossing. Such
bank may have the check collected by another bank. Where the bank whose name
appears in a special crossing is the drawee itself, the cheque may be paid to a person who is
the customer of the drawee.
What if the bank pays a crossed cheque contrary to the stipulations under articles 664
and 665 of the commercial code? – A bank shall be liable for the resulting damage up to
the amount of the cheque.Article 666 of the code
24. 4.Account Payee Cheque - article 867
It is done by writing “account pay only” or crossing it twice with two parallel lines on
the left hand side of top corner. In this case, payment is effected in book entry. Here
is anAccount Pay Cheque
25. 5. Post-Dated and Ante dated Cheque
.
If a cheque bears a date which is yet to come (future date) then it is known as post-dated
cheque. A post dated cheque cannot be honored earlier than the date on the cheque. Usually
people will write a postdated cheque if they do not have the proper amount of money in
their bank balance. On the other hand, an ante-dated cheque is a cheque with a date that is
earlier than the actual date on which it was written.
Do you think post dated and antedated cheque are recognized under the Ethiopian
commercial code?
Article 855 of the commercial code states that “A cheque shall be presented for payment
with in six months of the date thereof, regardless of when the cheque was issued.”
What did you understand from the phrase “regardless of when the cheque was issued”
26. 6. Blank Cheque-
It is a signed cheque with the amount left for the payee to fill in. It gives an
unlimited freedom of action for the payee. Is it recognized under the Ethiopian
commercial law? Does a blank cheque mean an incomplete cheque as is provided
under article 841 of the commercial code?
27. Presentment for Payment of Cheque
Unlike bill of exchange and promissory note, cheque is payable only at sight. Put
differently, cheque always mature immediately after its issuance.Article 854 of the code.
The holder of the cheque can ascertain whether or not the drawee bank will pay him/her
by presenting the instrument for payment. The holder of a cheque can not exercise
his/her rights on the cheque unless he/she presents the cheque for payment.
Acordingly, “a cheque shall be presented for payment within six months of the date thereof,
regardless of when the cheqeu was issued.” Article 855 of the code.
Note: The period for presentment begins to run from the date specified on the face of the
cheque and not of the date of delivery. Simply stated, the date of delivery has no
relevance in calculating the time limit for presentiment.
28. Cont.
Where is the place of presentment? The commercial code is silent. Shall we make analogy
from article 828 of the commercial code which states that the place of payment would be
the first place mentioned under the name of the drawee, if it is not expressly provided; or if
no place is mentioned at the principal establishment of the drawee?
Thus, can we conclude that a check should be presented for payment at the bank or a
branch where the account of the depositor is maintained?
A drawee (the bank) to whom a cheque is presented for payment has two options, either
accepting the cheque for payment (honor) or refuse to accept the cheque for payment
which is called dishonor.
If the bank accepts the cheque for payment, the modes of payment and the effects thereof
will be in the following way:
29. Modes of Payment of A honored Cheque and Its Effect (Articles 859-862)
A. Mode of Payment
Article 861- full discharge
Article 859- partial discharge
Article 860- the obligation of the bank to verify signature
Currency for payment – article 862
B. Effects of Payment
Every endorser who has taken up and paid a cheque may cancel his own endorsement and those
of subsequent endorsers.Article 875 (2) of the commercial code
A party who takes up and pays a cheque can recover from the parties liable to him, the entire
sum which he has paid; interest an the said sum calculated at the legal rate, as from the day on
which he made payment; any expenses in which he has incurred and commission not exceeding
two per mille.Article 874 of the commercial code
30. Liability of the Bank.
The bank is bound to honor the customers cheque provided the conditions are
fulfilled.
1.Availability of sufficient fund in the account- a cheque may only be issued if the
drawer has funds with the drawee and in accordance with an express or implied
agreement under which the drawer has the right to dispose of the funds by cheque.
Article 830 of the commercial code. The mere fact that the drawer does not have
sufficient fund does not affect the validity of the cheque according to article 830 but
justifies the bank in refusing payment of the cheque.
2. Presentment of the cheque in due time- a bank is bound to honor a cheque only
when it‟s duly required to pay. According to article 855 of the commercial code, a
period of 6 month is considered sufficient time within which a cheque must be
presented for payment.
31. Dishonoring of a Cheque
The bank has the duty to honor (accept payment) when a cheque is drawn upon it by its
customer. The act of the bank to refuse payment is called dishonor. Sometimes, dishonor of a
cheque is termed as„return a cheque unpaid‟ for various reason.
What are the reasons to be given by banks for dishonoring a check?
1.Termination of the contractual relationship between a bank and a customer –
2. Cheque with improper form
3. Stopping of payment of a cheque- stop payment of a cheque is an instruction issued by a
cheque account holder to its bank to cancel cheque payment. Article 2.11 of Cheque account
operation directive No 64/2016
The drawee (bank) is authorized to refuse to pay a check if it is so ordered by the drawer as
per article 857 of the commercial code. Is the bank become liable if it pays to the payee
despite the fact that the drawer instructs not to pay?
32. Cont.
The English version and the Amharic version has discrepancy. The Amharic version of the said
provision states that “ቼኩ ከመከፈሉ በፊት አውጪው( drawer) ባንኩን እንዳትከፍልብኝ በሎ
የነገረው እንደሆነ ባንኩ ( drawee) የቼኩን ዋጋ አልከፍልም ለማለት ይችላል፡፡” The English version
states that “ The stopping of the payment of a cheque by the drawer is sufficient authority for a
bank to refuse payment.”
Why the drawer orders the bank to stop payment ?
The cheque has been either lost or stolen.
The drawer may believe that the payee is unwilling o unable to fulfill the contract in respect of
which the drawer issued the check.
Is there any formality requirement in relation to application for stop payment? The commercial
code has not set any requirement.
33. Cont.
4. Insufficiency of funds in account -The drawee (the bank) may refuse payment where there is no sufficient
fund in the current account the drawer. Drawing a cheque with out sufficient fund entails criminal liability
as per article 693 of the criminal code.
Article 693 of Criminal code- Drawing of Cheque without Cover
(1) Whoever intentionally draws a cheque without cover or knows that there will not be full cover at the time of
presentment for payment, is punishable with simple imprisonment, or according to the gravity of the case, with rigorous
imprisonment not exceeding ten years,and fine.
(2)Where the act is committed negligently,the punishment shall be fine,or simple imprisonment not exceeding one year.
አንድ ቼክ በሚወጣበት ጊዜ በቼክ አውጭው ሂሣብ ቁጥር በቂ ስንቅ አለመኖሩ እየታወቀ ቼክ የተሰጠ መሆኑ እስከተረጋገጠ ድረስ ከግል ተበዳዩ ጋር
የቤተሰባዊ ግንኙነት ያላቸው ስለሆነና ቼኩን የሰጠው በመተማመኛ መልኩ ነው በማለት ድርጊቱ በቸልተኝነት የተፈፀመ ነው በሚል በወንጀል ህግ ዓንቀፅ
693(1) መሰረት የቀረበ ክስ ወደ ወንጀል ህግ አንቀፅ 693(2) በመቀየር ተከሳሹን ጥፋተኛ ማለት የወንጀል ሕግ አንቀጽ 23፤59 ድንጋጌ ያላገናዘበ
ስለመሆኑ Federal Supreme Court Cassation Division Decision,Volume 23, File Number 14907
Do you think that the death and incapacity of the drawer a ground to refuse payment of cheque?
Article 857 of the commercial code authorizes a bank to pay a cheque even through it is aware of
the death or incapacity of the drawer.
34. Right of recourse
Against whom the holder is entitled to exercise a right of recourse?- against the endorsers,
the drawer and other parties liable.Article 868 of the commercial code
What are the preconditions to be observed in Exercising Right of Recourse?
A. Presentment of a cheque for Payment-The holder has to present the cheque for payment
within six months from the date that is specified on the cheque. What is the effect of failure
to present a cheque for payment? - It brings loss of right of recourses against parties liable for
the payment of the cheque.
Why the law made presentment of a cheque for payment a valid precondition to exercise
right of recourse? It helps to establish the liability of the parties who are secondarily liable in
case the person with primary responsibility fails to discharge his/her/its obligation.
35. Cont.
Who is primary responsible? – It is the drawer. See article 840 of the commercial code which
states that “the drawer guarantees payment and any provision by which he releases himself from
this guarantee shall be of no effect.”
B. Protest for non payment- it is a formal declaration of the fact of non-payment usually executed
by a notary in order to avail only of one‟s right of recourse against the drawer and the endorsers.
Articles 868+869+781 (1). As it is a mandatory requirement to exercise right of recourse, the
protest or equivalent declaration shall be made before the expiration of the limit of time for
presentment. That is, it must be made within the time prescribed for presentation for payment
which is six months starting from the date specified on the cheque. Article 869 (1) of the
commercial code
Exception to the duty protest(where protest would be unnecessary?) – Provision of “sans protest”
-Article 871. Note that waiver of protest in relation to cheque does not include a waiver of
presentment.Article 871 (2) of the commercial code.
36. Cont.
C. Notice of Dishonor –a holder has to give notice of non-payment to his endorser and to the
drawer as per article 870 (1) of the commercial code.
The non-compliance with the duty to give a notice of dishonor will not extinguish the right or
recourse or the person who failed to give notice within the prescribed limit of time against the
endorser, drawer and the other parties liable on the cheque. However, the holder will be liable for
any damage he causes by his negligence to an amount not exceeding the amount of the cheque.
Article 870 (8) of the commercial code
Is there any formality requirement for notice of dishonor?- the commercial code has not set any
formality requirement. Thus, notice of dishonor may be given either in writing or oral. Article
970 (6) of the commercial code
Time for notice of dishonor-within the four working days following the day on which the protest ism drawn up.
Where notice would be unnecessary? Is there an exception to the duty of notice of dishonor?
37. Parties Liable for dishonor cheque
Who are liable to a dishonored cheque? - All the persons liable on a cheque shall be jointly and
severally liable to the holder.Article 872 (1) of the commercial code
All person liable on a cheque refers drawer, drawee, endorsers and acceptor for honor
How the holder exercise his recourse right against them?- The holder may sue all these persons
individually or collectively without being compelled to observe the order in which they have
become bound.Article 872 ( 2) of the commercial code
Note that proceedings against one of the parties liable shall be no bar to proceedings against the
others, notwithstanding that such other parties may be subsequent to the party first proceeded
against.Article 872 (4) of the commercial code
38. Extent of liability
According to article 872 of the Ethiopian commercial code, a holder can sue all persons liable on a
cheque individually or collectively without being compelled to observe the order in which they
have become bound. Article 873 of the commercial code has stated what can be claimed from
those sued in article 872. Accordingly, the holder may claim from the party against whom he
exercises his right of recourse
The unpaid amount of the cheque
Interest at the legal rate as from the date of presentment
The expenses of the protest or equivalent declaration, and of the notices given and any other
expenses
A commission not exceeding one third percent
Concerning the extent of liability a party who pays for the holder requires to cover from another
liable party, you may see article 874 of the commercial code.
39. Defences
Article 717+850 of the commercial code
Article 850 of the commercial code states that “Persons sued on a cheque cannot setup against the holder
defences founded on their personal relations with the drawer or with previous bolder, unless the holder in
acquiring the cheque has knowingly acted to the detriment of the debtor.”
“Who are persons sued on a cheque…” under article 850 of the commercial code?- endorsers and
acceptor for honor, not the drawer.
Federal Supreme Court Cassation Division Decision,Volume 9, File No. 43315
In relation to defenses, you are advised to read the followings:
1.ሳባ አበረ፣ ስለሚተላለፉ የገንዘብ ሰነዶች አንዳንድ ነጥቦች
2. ዘካርያስ ቀንዓ፣ በሚተላለፊ ሰነዶች ባለዕዳ የሆኑ ሰዎች በኢትዮጵያ ሕግ ስላላቸው የመከላከያ
ወይም መቃወሚያ ነጥቦች
40. Period of limitation-Article 855+881
Three stipulations have been provided in relation to time limitation.
1. Actions of the holder against the drawer endorser or other third parties liable shall be barred
after six months from the expiration of the limit of time for presentment. Who are other third
parties? Other third parties refer to acceptors for honor. See articles 853+ 766-768+868+881
(1) of the commercial code
See the Federal Supreme Court Cassation Bench Decision,Volume 21, File No. 139932
Note: the holder can exercise his/her right of recourse against person liable on a cheque (drawer,
,endorsers third parties who guarantee as to the payment of the cheque) jointly and severally.
Article 872 (1) of the commercial code
The principle of joint and several liabilities is provided under article 1897 of the civil code which
states that “the creditor may require all the debtors or one of them to discharge the obligation in whole or in
part and each debtor shall be liable until the obligation is fully discharged.”
41. Cont.
Accordingly, if the cheque is dishonored, the holder may enforce payment from the drawee, an
endorser, the acceptor for honor or the drawer or all of them at his option. The holder may also
entitled to join all parties liable on the cheque in one suit.
Proceedings against one of the parties liable shall be no bar to proceedings against the others, not
withstanding that such other parties may be subsequent to the party first proceeded against.
Article 872 (4) of the commercial code
2. Actions of recourse by the different parties liable for the payment of a cheque against other
parties liable shall be barred after six months from the day on which the party liable has paid the
cheque or the day on which he was sued thereon.Articles 881 (2)+ 872 of the commercial code
It is true that a holder is entitled to sue anyone of the parties liable for the payment of the cheque.
For instance, a holder may sue the first endorser out one of the endorsers pays the amount
specified on the cheque. In this case, the first endorser has the right to sue either the last endorser
or the middle endorser to share the amount to be paid for the holder of a cheque.
42. Cont.
3. The holder can also exercise his/her right of recourse against the dawee like in case of wrongful dishonor.
Accordingly,an action of the holder against the drawee (bank) shall be barred after three (3) years from expiry
of time limit for presentment.Article 881 (3)
Situations in which limitation does not apply
Article 881 (5) of the commercial code states that “limitation shall not apply where judgment has been
pronounced or the debt has been acknowledged by separate act.” When a judgment is said to be
pronounced? What is acknowledgement of debt? Article 180 of the civil procedure code of Ethiopia states
that “after a suit has been heard, the court shall pronounce judgment.” On the other hand,
acknowledgement of debt is the act of the debtor to admit his/her debt obligations. The debtor
admits that he/she owes a sum of money to the creditor and undertakes to repay the amount on
terms agreed upon between the parties involved.
Accordingly, where a judgments has been pronounced; or although judgment has not been pronounced, if the debt has
been acknowledged , article 881 (5) of the commercial code excludes the application of the statue of limitations.
43. Interruption of Limitation Action- article 882
What are the grounds of interruption?Article 882 (1)
Applicability of interruption- to whom such interruption is applied? –article 882 (2)
What is the effect of interruption?A new period of limitation starts to run.Article 882 (3)
What if the period of limitation is not raised by the concerned parties? Can the court raise
objection by its initiation?
Time limit for the presentment or protest of a cheque – article 883
Presentment of a cheque for payment or protest on dishonor of a cheque may only take place on
a working day. What if the time limit prescribed by law for presentment of protest in relation to a
cheque is public holiday? - the time limit shall be extended until the first working day which
follows the expiration of that time.
44. Cont.
Article 884 of the commercial code gives authority to the contracting parties to fix limitation
periods which differ from the time fixed by the statutes of limitation by stating that “legal or
contractual limits of time shall not include the day on which the period begins to run.”
What if contracting parties may fix a period which is unreasonable which contradicts with what is
provided under the commercial code?
The absence of grace period for a cheque- article 885 of the commercial code
what is grace period ?- It is a set length of time after the due date during which payment may be
made after expiration of the time expressed in the cheque without penalty. As a cheque is payable
on demand (immediately on presentment), grace period is not granted for a cheque.
45. Remedies of a holder who has lost his right of recourse
A holder of a cheque who has lost his right to recours may still have an opportunity to recover
his/her money based on the obligation underling the issuance or the transfer of the commercial
instrument or the provisions of the law (unlawful enrichment). See articles 799+886 of the
commercial code and article 2164 of the civil code. Article 2164 of the civil code states that
“Whosoever has paid what he was not required to pay may recover it.”
The Federal Supreme court Cassation Bench decided that “A person who did not demand payment
of the amount written on the cheque within the time prescribed by the law, or who was
suspended while in possession, can file a charge of unjust enrichment by presenting the same
cheque as evidence.Volume 12, File No 40173
“በቼክ ላይ የተፃፈለትን ገንዘብ በህጉ በተቀመጠው ጊዜ ክፍያ ያልጠየቀበት ሰው ወይም በይዞታው እያለ የታገደበት
እንደሆነ ይህንኑ ቼክ እንደ ተራ ሰነድ በማስረጃነት በማቅረብ ያላግባብ የመበልፀግ ክስ ሊመሰርት የሚችል
ስለመሆኑ የንግድ ህግ ቁ. 799”- ቅጽ 12 የመዝገብ ቁጥር 40173
46. Current Issues
Electronic cheque-
Issuing cheque as a guarantee- Can a cheque be issued as a guarantee?
Two line arguments
1. Issuing cheque as a guarantee is against the very nature of cheque.
2. As there is clear prohibition as to the issuance of cheque as a guarantee in the commercial
code ( the governing law), issuing cheque as a guarantee is possible and acceptable.
What is the stand of Cassation bench? Issuing cheque as a guarantee is possible- Volume 25,
File No.161448 ( decision was given on July 29/2013 EC)
በወንጀል ህግ አንቀጽ 693(1) መሰረት የሚያዝበት በቂ ገንዘብ ሳይኖር ቼክ ማውጣት ወንጀል የተከሰሰ ቼክ አውጪ
ቼኩን ለመመንዘር ሳይሆን በግለሰቦች መካከል በነበረው የንግድ ግንኙነት መነሻነት በመተማመኛ የሰጠ በመሆኑ
ከወንጀል ኃላፊነት ነፃ ሊወጣ የሚቺለው ቼኩን በዋስትና ወይም በመያዥያነት የሰጠ በመሆኑ እና የዋስትና ወይም
የመያዥያ ውሉም በንግድ ህግ እና በፍታብሔር ህግ በተመለከተው መመዘኛ መሰረት ስለመፈጸሙ በማስረዳት
ከመሆኑ በቀር በሰው ምስክር የሚሰጥ ማረጋገጫ ተቀባይነት የሌለው ስለመሆኑ
