Commercial papers - Al-Baynat Law Firm

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Commercial papers

It can be defined due to its characteristics as: “written bonds or instruments that are negotiable by endorsement or delivery, representing a monetary right payable upon sight or after a short period, and it is customary to accept them as a payment instrument that takes the place of money.”

The system defines commercial papers as three papers:

1- Promissory note: It is an instrument issued according to which its maker pledges to pay a specific amount of money on a specific or determinable date or upon sight, to another person called the beneficiary without restriction or condition.

Parties: (creditor, debtor).

2- Check: It is an instrument issued according to which its maker undertakes to pay a specific amount of money on a specific date or upon sight, according to the legally specified period, to another person called the beneficiary, and it is an instrument of fulfillment.

According to Article (118) of the Commercial Papers Law: Anyone who draws a check in bad faith that does not have an existing and withdrawable consideration for payment shall be punished by imprisonment for a period not exceeding three years and a fine not exceeding fifty thousand riyals.

Parties: (bank, drawer, beneficiary).

3- Bill: An instrument drawn up according to a specific legal form, which includes an order issued by a person called the drawer, addressed to another person called the drawee, to pay a sum of money upon sight or on a specific or determinable date. To the order of a third person called the drawer.

Parties: (drawer, drawee, beneficiary).

The relationship due to which commercial paper is created

It is worth noting that one of the objective conditions for commercial papers is: (the reason), which is represented in the relationship between the drawer and the beneficiary, as if one person bought goods from another and the buyer issued a bill of withdrawal to the seller, in payment for the price of the purchased goods, then this is the reason.

Also, the reason must exist and be legitimate, meaning that it should not be in violation of public order, Islamic law, or the commercial paper system.

Commercial papers, Al-Baynat Law Firm

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