Article 4 | September 2014 : Debts and Bounced Cheques in Dubai

Debts and Bounced Cheques in Dubai: Criminal and Civil Implications under the UAE Law

by Al Mubasheri  |  September 2014

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The growing need of expatriates and nationals alike, for quick solutions from managing mundane expenses to business survival essentials has been remarkable along with the country’s progressive rise throughout the years. Methods of acquiring loans and credits have significantly influenced the lives of people in the gulf. Credit card utilization for example, records the highest penetration in UAE in 2011 as reported by Lafferty group with figures of 199.4 credit cards per 100 individuals. Bank loans on the other hand, have been offered on varied spectrums embedding its obligatory impact on lives of people living in UAE. The latter has been made accessible by creditors and has been excessively offered in all streets of the country hence luring individuals in acquiring loans from varied forms of social status.

United Arab Emirates has imposed strict laws on credit, loans, bounced cheques and the like, that has greatly impacted debtors especially those encumbered with financial descent during the worldwide recession and those who were laden with inevitable termination, redundancy, dismissals relative to bankruptcy and whatnot.

The law constitutes two manners in which a creditor may legally implicate its debtor. Case can be dealt as a criminal offense and/or as a civil offense.

In acquiring loans, the debtor is duty-bound to furnish undated cheques to the creditor and the latter is entitled for encashment of such according to agreement and policies set forth during the transaction. However, funds that are insufficient to pay the dues will implicate the debtor to a criminal offense known as Check Fraud as indicated in the UAE Federal Law of 1987 – Penal Code, asserting that “Detention or a fine shall be imposed upon anyone who, in bad faith, gives a draft (cheque) without a sufficient and drawable balance or who, after giving a cheque, withdraws all or part of the balance, making the balance insufficient for settlement of the cheque”

The debtor would then be arrested for the crime or in some instances will have an option to pay the owed money to resolve the issue. If the result is former, the perpetrator will be imprisoned for a specified time and be imposed of fines.

The case will then be also discussed under the civil law in which the debtor will be bound to repay all his dues as indicated in the Federal law no. 5 of 1985 Article 246 stating "a contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith" implying that the debtor has committed breach of contract upon his inability to fulfill financial obligations to the creditor.

Absconding is also a rampant issue that has been a common resort of debtors upon breach of agreements on fulfillment of financial obligations. A creditor has an option to obtain court judgment to have the perpetrator blacklisted in the immigration to deny them passage to the country either in transit or entry.

Debt is a result of unfortunate and unexpected circumstances such us unfair termination, organizational decline or even death. Nevertheless, it still connotes the desire or need to live beyond available means. Contemplating if a benefit of such measures outweighs the losses and preparing extensive plan of action on fulfilling obligations will lure individuals away from unnecessary burden of paying debts.

About Al Mubasheri Advocates and Legal Consultancy

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