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05 June 2023

17 Thul-Qi'dah 1444

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Law No. 16 of 1971 issuing the Law of Civil and Commercial Articles

Law Summary Record Type: LawNumber: 16Date: 25/08/1971 Corresponding to 04/07/1391 HijriNumber of Articles: 477Status: In force

Official Gazette :Issue: 7Offcial Journal Issue Publication Date: 01/01/1971 Corresponding to 05/11/1390 HijriPage from: 3458

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Subchapter II: Failure to pay- Claiming and Recourse of non-Acceptance and non-Payment

403 Article

The holder of a PN may - in case of non repayment on due time - recourse (revert) to endorsers, drawer and other obligors.

He also may recourse to above people in the following cases:-

In case of a partial or total refrain from acceptance.
In case of bankruptcy of the drawee either before or after the PN and in case of stopping payment of what he has to pay) even if said stopping is not proven by a decision), and in case of un-useful retention to his properties.
In case of bankruptcy of the drawer of a PN which is conditionally not to be submitted for acceptance.

Guarantors may - upon reverting to them in cases shown in items 2 & 3) submit to the president of the court - within three days from the said reverting - a petition requesting period for repayment. Then the court may Determine (if the petition is justifiable) a time for repayment, provided the time determined shall not exceed the PN appointed due date... Such issue is no way subject to any contestation (appeal).

404 Article

In case due date of a PN comes in an official holiday, claiming for its fulfilment is not permitted except on the next day. Besides, no procedures relevant to the PN is allowed to be made and in particular its submission for acceptance or making a protesto or any other alternative, except on a working day. In case of determining any date to take action relevant to the PN and it happened that its last day coincides with a holiday, such date is postponed to next day. Holidays within the appointed date shall have to be calculated within the appointed date. First days of the legal appointments or the agreement related to the PN are not to be calculated unless otherwise agreed

405 Article

Objection to acceptance/fulfilment of a PN is confirmed by a non-acceptance/non-fulfilment protesto , which has to be written by the notary public. Protesto shall contain a literal image of the PN and the confirmed wordings of acceptance and endorsement and the reminder regarding fulfilment of the PN. Also it should contain presence or absence of the persons committed to acceptance or fulfilment and reasons behind abstaining from acceptance or fulfilment.

Notary public should leave a copy from the protesto to the person who was present during writing and he has to enter all papers of the protesto day by day, provided to take care of regularity of the dates in a paged record duly indexed. Entering (writing) in said record shall have to be in the same way used in indexed records.

Notary public has, within the first 10 days of every month, to send to the office of the commercial record a list of protestos of non payment related to the accepted PNs and bonds which were prepared during the last month. Commercial Record Office should keep books to record said protestos...Which may be seen by any body against the required fees. Said office should also make a publication containing said protestos.

406 Article

Non acceptance protesto should be made on the times appointed for the submission of the PN. In case first submission of acceptance comes on the last day of the appointed date for submission (as per Article 381), protesto may be made on the next day.

407 Article

Non fulfilment protesto for the PN- which is due on a definite date or after a period of its date or from the date of its sight - should be made in one of the two working days following its fulfilment. In case PN is entitled for payment upon sight, a non fulfilment protesto should be made according to conditions shown in the above article related to non acceptance protesto.

408 Article

Non acceptance protesto may compensate (dispense) submission of the PN for fulfilment and the non fulfilment protest.

409 Article

In case drawee stops payment, either he was accepting or not accepting the PN, and in case of applying unlimited retention to his properties, holder of the PN is not allowed to recourse to his guarantors except after the submission of the PN to the drawee for repayment and after making the non fulfilment protesto. In case of bankruptcy of the drawee (either he was accepting or not accepting the PN) and in case of bankruptcy of the drawer of the PN (which is not be submitted for acceptance), submission of bankruptcy ruling itself shall be enough to enable the holder from using his rights to recourse to the guarantors.

410 Article

The drawer or any endorser or precautionary guarantor may exempt the holder of the PN from making non fulfilment / non acceptance protesto once he commences his right of recourse, if he notes down/signed on the PN a condition of “recourse without expenditure” or “without protesto” or any other expression giving the same meaning. This condition shall not exempt the holder from the submission of the PN on the defined dates and also from not making the required warranties, besides, any one who clings (before the holder) not to abide by said dates should prove it. However, if the drawer he who wrote said condition, all consequences shall be applied to all signatories, while if it is written by one of the endorsers or the precautionary (emergency) guarantors, consequences shall be applied only to him. In case the condition was put by the drawer and irrespective of that, the holder made a protestto, he himself alone shall then bear all expenses. While, in case the condition was made by an endorser or precautionary guarantor, then it's possible to recourse to all signatories for the expenses of the protesto (in case if it has been made).

411 Article

Holder of the PN should remind the drawer & endorser of its non acceptance or non fulfilment during 4 working days following the protesto or the submission for fulfilment or acceptance - in case it includes condition of exemption of protesto- . Each of the endorsers and during 2 working days following receipt of the reminder should also inform the person who endorsed to him the PN of his receipt to said reminder giving to him also names and addresses of persons who made the previous reminders...and as such from one endorser to the next one until reaching the drawer...Whereas, appointment starts for each endorser from the date he received the reminder.

Knowing that, once one of the signatories of the PN is informed in the above procedure, his guarantor is supposed to be informed of the same appointment date. In case if one of the signatories did not show his address on the PN, or showed it ambiguously, it would be enough to remind the previous endorser. It's mandatory for any person who is supposed to remind other person to do that in any way, even by returning the PN itself. Also he has to verify that he reported the” reminder” on the decided time. Appointment is considered as duly cared about if the reminder is sent about the said appointment via a registered mail.

Rights of the person who is supposed to report the reminder shall not be abolished in case he did not do it on the time shown above, but he may (if necessary) has to compensate the damage resulted from his negligence, provided such compensation does not exceed the amount of the PN.

412 Article

Drawer, acceptor, endorser and the original guarantor are jointly responsible towards its holders and the later may appeal to them jointly or in parts irrespective of any sequence. This right is confirmed for every signatory on the PN who repaid its amount for the relevant people. Knowing that any case filed against any one of the obligors shall not prevent from appealing to others, even if their commitment was after the one who was firstly sued..

413 Article

PN holder may request - from those who has the right to revert (recourse) to - the following:-

Principal amount of the unaccepted or unpaid PN plus interest if provided,
Interests calculated as per legal fare (5%) from maturity date,
Costs of the protesto, reminders and other relevant costs,

In case of recourse before the maturity date of the PN, an amount should be reduced from its amount equal to the official discount rate on the date of the recourse in the place of the holder's domicile.

414 Article

Person fulfilling the PN may ask the guarantor of the following:-

A-All the amount repaid, b- Interests of amounts repaid calculated from the date of fulfilment as per legal rate (5%) c- All incurred expenditure.

415 Article

Courts are not authorized to grant periods for PN repayments or take any action related to it except under the conditions stipulated in the law.

416 Article

Any obligor - who was asked or targeted to be asked for a PN by way of recourse- may, in case of fulfilment, ask to receive the PN , the protesto and the clearance against fulfilment. Besides, every endorser, who repaid a PN, may write off (delete) his endorsement as well as all consequent endorsements.

417 Article

In cases of force majeure that made the submission of a PN or making a protesto on the appointed time impossible, then said time is extended. The holder should notify without any delay the person who endorsed the PN to him about said force majeure and should confirm said notification affixing the date and signature on the PN or on the attached paper. Said notification should be passed in serial until it reaches the drawer. The holder after clearance of the force majeure should submit the PN for acceptance or repayment without any delay and then make the protesto if required..

Should the force majeure extend for more than 30 days from the due date, recourse to obligors is then possible without submission of the PN or making the protesto. In case the PN is entailed for payment upon sight or after a period of the sight, validity of the 30 days starts from the date when the holder notified the endorser of the PN about the force majeure (even if said date occurs before the time of PN submission). Time of sight is to be increased over the deadline of the 30 days, in case the PN is due to fulfilment after a period of its sight.

Affairs related to the holder of the PN personally or to whomever he instructed to submit or to making the protesto shall not be considered as a force majeure

418 Article

Any one who has the right to revert to the others from the obligors of the PN may collect his right by drawing a new PN on one of his guarantors' which is repayable upon sight and in the domicile of the said guarantor, unless otherwise agreed.

419 Article

Recourse PN includes the amounts mentioned in articles 413, 414 in addition to any commission or price of stamps. In case the drawer of the recourse PN is the holder; its amount shall be determined on the basis of the determination of the amount of an “upon sight payable PN drawn from the place where the original PN deserved to be repaid to the place of the PN guarantor.

In case the drawer of the recourse PN is one of the endorsers, its amount shall be determined on the basis of the determination of the amount of an “upon sight payable PN” drawn from the place of the drawer of the recourse PN to the place of the guarantor..

420 Article

If recourse promissory notes were many, then it will not be authorized to ask the drawer of the original PN or any of its endorsers except for the price of one recourse PN.

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