Checks, Duplicates, and Rural Credit Evidence: Legal Aspects

Posted on Dec 12, 2024 in Law & Jurisprudence

Checks: Definition, Parties, and Requirements

Concept: A check is an order of unconditional cash payment for a certain sum of money, given based on an adequate provision of funds or due to a contract of credit available from banks or equivalent financial institutions.

Parties Involved

  • Issuer: The person giving the order to the drawee for payment after verification of funds. They are the principal debtor.
  • Drawee: The bank or equivalent financial institution. The drawee of a check does not, under any circumstances, have any exchange obligation.
  • Beneficiary: The person to whom payment shall be made, as per the order issued by the drawer.

Note: Funds available in a current account belong to the account holder (drawer) for the settlement of the check.

Requirements of a Check

  • Extrinsic: A capable agent whose will was freely expressed, without any defect.
  • Intrinsic:
    • a) The term “check,” written in the text.
    • b) The unconditional order to pay a particular sum.
    • c) The name of the bank/institution to pay (drawee).
    • d) The date and place of issue.
    • e) An indication of the place of payment.
    • f) The signature of the issuer or their agent with special powers.

Types of Checks

  • Crossed Check: Allows the identification of the creditor and may only be paid through an escrow account. The crossing can be:
    • General: Two parallel lines on the obverse.
    • Special: Includes the name of the bank between the lines.
  • Check to be Credited to Account: The issuer/carrier prohibits the payment of money through the registration on the front of the phrase “to be credited to the account.”
  • Certified Check: Guaranteed by the drawee bank for a certain period.
  • Administrative Check: Drawn by the bank against one of its establishments.

Endorsement

A check is a title of the linked model. The transmission of a check payable to a qualified person is transferable through endorsement, with or without the clause “to order.” With the CPMF, it is endorsed only once. Its movement follows the same rules as a bill of exchange, with the following differences:

  • a) It does not admit bond endorsement.
  • b) The endorsement of the drawee is null, using only a receipt (exception: an endorsement made by the establishments of the drawee for payment in another setting).
  • c) Endorsement after the submission deadline is only for civilian transfer of credit.

Endorsement: Expressed in the conventional way or by a simple signature on the front of the check. In the absence of an indication, the issuer is considered endorsed.

Acceptance: Checks do not admit acceptance. The square is required to accept payments by check.

Payment: Always in sight, against presentation.

  • Checks are to be taken into account until paid by journal entry by the drawee.
  • The deadline for payment by check is 30 days for the same square and 60 if it is a different square. The loss of the term implies the loss of the right against the liable parties, and the right to credit if there are no more funds.
  • A check can serve as an instrument of proof of payment and extinguishment of obligation.

Payment: Bad Checks

A check without funds is typified as swindling. A creditor may not refuse partial payment. The drawee should not pay the check after the limitation period.

  • Running bad checks prescribes in six months from the end of the deadline for submission. After the expiry of that period, an action based on unjust enrichment is admissible within two years.

Check Stop Payment

The interruption of a check can be:

  • a) Withdrawal (counter-order): Notice of the grounds, made after the deadline for presenting the check.
  • b) Opposition: Written notice, with a relevant rate of duty, prior to the settlement of the title. Restraining can configure a crime of fraud in payment by check (art.171). The drawee cannot question the order.

Limitations Period for Checks

  • a) 6 months, as the deadline for submission:
    • The holder against the issuer and its guarantors.
    • The holder against the endorsers and their guarantors.
  • b) Any of the other co-obligors against others: 6 months from the day they paid the check or were fired.

Note: The action of unjust enrichment against the issuer or co-obligors prescribes in two years from the day the limitation of enforcement action is consummated.

Post-Dated Checks

It is important to recall that, according to the Uniform Law on Checks, this title is an order of cash payment. Thus, checks with a later date than the actual day of issue should not be taken into account. The future date is not considered, and a check is always payable in cash.

Duplicates

Concept: A duplicate title is issued based on a credit requirement from buying and selling commercially or providing certain services.

  • Here’s an example of how a duplicate arises:
  • In the sale of a commodity, with no earlier than 30 days, the seller must extract their invoice to present it to the buyer. On the issue of the future, or after the sale, the merchant can extract a duplicate which, being signed by the buyer, will serve as documentary proof of debt.

Essential Requirements of a Duplicate

A duplicate, as a formal title, has the following requirements in the Act:

  • The duplicate name, the date of issue, and the serial number.
  • The invoice number.
  • The maturity date or the declaration to be duplicated in sight.
  • The name and address of the seller and buyer.
  • The fare, in words and figures.
  • The square of payment.
  • The clause order.
  • The statement of the receipt of their accuracy and the obligation to pay it, to be signed by the buyer accepted as currency.
  • The signature of the issuer.

Rating of a Duplicate

A duplicate title is a linked model, and the merchant adopting it must maintain a registry of duplicates. The duplicate must be a single invoice.

  • A duplicate title is causal because it can only represent credit arising from a particular cause. The issuance and acceptance of a simulated duplicate is a crime under Law 8137/90.

Simulated Duplicate

A duplicate title is one whose existence depends on a contract of sale or commercial delivery service. In other words, every duplicate must correspond to an actual sale of goods or services. The issuance of duplicates that do not have these activities as their source is considered a criminal offense. It’s called a “cold duplicate” or simulated duplicate.

Maturity of a Duplicate

  • Sight: Payable upon presentation.
  • At a certain time after sight.

Shipping of a Duplicate

  • Referral by the creditor: 30 days, the square of the debtor.
  • Referral by a financial institution: 10 days.

Return: Within 10 days from the submission, signed or accompanied by a statement containing reasons for refusal to accept.

Acceptance of a Duplicate

The seller has a deadline to submit the duplicate. The title is required, and its refusal may only occur in certain cases provided by law (failure or non-receipt of goods when sent at the risk of the seller, defects in quality and quantity, divergence in terms or prices).

Protest of a Duplicate

Must be done:

  • For lack of acceptance.
  • For failure to pay.
  • For lack of return.
  • The duplicate can be appealed within 30 days after its due date for failure to pay, accept, or return.
  • The loss of the term involves only the loss of the right against the liable parties.
  • The triplicate may be issued in case of loss or misplacement of the duplicate.

Limitations Period for Duplicates

  • Against the drawee/guarantors: 3 years from the date of maturity.
  • Against the endorser/guarantors: 1 year from the date of the protest.
  • Of the co-obligors against others and against the drawer: 1 year from the date of payment of the title.

Evidence of Rural Credit

a) Rural Ballot Pledges (= Pawn)

  • Linked to the pledge of movable property specified.
  • The property can be specified in a separate document.

b) Rural Mortgage Ballot

  • Linked to a mortgage of immovable property.

c) Rural Ballot Pledges or Mortgage

  • Combination of the above.

d) Rural Credit Note

Although not tied to any collateral, it has special privileges on the goods detailed in Article 1563 of the Civil Code (movable property of the debtor, subject to no real right of others, non-mortgaged properties, net assets subject to lien or mortgage upon payment of the respective creditors, and the value of insurance and expropriation).