Limitation periods for bounced cheques

A review of the legal grounds and the difference between the lapse of the action and the lapse of the right

First: the legal basis for each time limit:

The legal nature (a time limit for presentment – not limitation in the strict sense), which is 6 months.

The legal text (Article 504 of the Commercial Code as amended by Law 156 of 2004 – the time limit for presenting the cheque to the bank for payment as long as it is payable in Egypt)

Limitation on negotiable instruments (lapse of the commercial action of recourse) – one year

Article 531 of the Commercial Code: the actions of recourse of the holder of the cheque against the drawer and the endorsers are time-barred after one year from the date it was presented for payment or from the date the time limit for presenting it expired (whichever is earlier)

Criminal limitation for the misdemeanour of issuing a cheque without funds – 3 years

Article 15 of the Code of Criminal Procedure: the criminal action in misdemeanours is extinguished after 3 years from the day the crime was committed (not from the date of refusal)

Ordinary limitation / the action for unjust enrichment – 15 years

Article 374/1 Civil Code: an obligation is time-barred after 15 years except where a special provision applies; used as a general rule when the cheque is not subject to the limitation on negotiable instruments (for example, where the drawer is not a merchant)

As for the question (of when the “year” begins to run), it is not necessarily from the date of the bank’s refusal, but from the earlier of two dates: the date the cheque was actually presented to the bank, or the date the six months set for presentment expired – whichever came first.

So if the cheque was presented within the six months, the year begins from the date of the actual presentment/refusal and not from the end of the six months.

Second: the difference between the lapse of the action through limitation and the lapse of the right, and its effect.

Distinguishing between the lapse of the action through limitation and the lapse of the right, and what is extinguished?

The lapse of the action through limitation: only the right to claim in court lapses; the debt turns into a natural obligation that remains in being the right, and in this case the right ends and disappears completely. And here the opposing party (the debtor) must invoke it expressly, otherwise the court will not apply it. And it is a plea relating to public order. And here limitation is interrupted by acknowledgement, the filing of an action or a notice/attachment

What if the debtor pays after the time limit has passed? He recovers what he paid because the right itself has lapsed He does not recover what he paid voluntarily, because the natural obligation was still in being.

The limitation of one year on cheques is treated by the courts as a limitation extinguishing the action, not as a lapse of the right itself.

It is settled in the principles of the Court of Cassation that the term “lapse of the action” is used in the context of the one-year limitation on cheques: the respondent applied for a payment order claiming the value of the cheque after the limitation period had been completed; its effect: the lapse of the action relating to this cheque through the one-year limitation – that is, the courts characterize the matter as a limitation extinguishing the action (and not a lapse of the right), which theoretically means that the right remains as a natural debt and another legal route can be taken.

Third: the alternative route after the “year” has lapsed

Even if the action on the negotiable instrument has lapsed through the one-year limitation, doctrine and case law allow the holder of the cheque another route: despite the limitation of the action for payment, the holder of the cheque may claim from the drawer the return of what he was unjustly enriched by – this is the action for unjust enrichment, and it is subject to the long limitation (15 years) and not the one year, because it is a civil action independent of the right under the negotiable instrument itself.

In other words: a delay of a year by the right holder, the lawyer or the chartered accountant in filing the action may cause the action of recourse on the instrument specifically (the year) to lapse, but it does not close the door to a civil claim for the underlying debt (the supply contract or the cause of the debt) or for unjust enrichment, which are subject to a longer period; but we believe it is better to commit to preserving the rights of the cheque holder through careful legal follow-up of all these time limits and taking the correct legal measures on time, to preserve the right and as a means of compelling the issuer of the cheque to pay its value as soon as he learns of it or after a judgment is issued against him, and hence the start should be with a misdemeanour complaint against him for issuing a cheque without funds, while completing the procedures in turn if he does not meet his obligation to pay the value of the cheque.

Note: each case (of a bounced cheque) must be studied separately, together with the measures taken and the date of each measure, in accordance with the provisions of the law and the above explanation, in order to preserve rights.