Analysis of the Place in Checks and Bills of Exchange in Iranian Law

Abstract

The place in checks and bills of exchange is one of the issues surrounding these commercial instruments. Despite its recognition in Iranian commercial law, discussions about the subjects and issues within its scope—such as the transfer of ownership of the place and, more broadly, the benefit of its inclusion in checks and bills of exchange—remain unclear due to the legislator's silence. This has led to numerous disputes in this area, disputes that affect the holder’s relationship with the responsible parties of the instrument and put their rights at risk. What is consistent with the rules regarding the place in commercial instruments, while also ensuring the rights of the holder to the greatest extent possible and providing security and credibility in the use of these instruments, is the acceptance of the theory of the transfer of ownership of the place in checks and bills of exchange. However, accepting this view requires the interpretation and analysis of existing laws based on legal principles and foundations that justify the existence of such a rule in regulations related to commercial instruments. Nonetheless, our legislator, in order to protect the holder of these instruments, has placed the obligors of the instrument under joint and several liability for the payment of the amount of the check and the bill of exchange, based on obligations independent of the underlying legal relationships. This solution, however, does not provide as much protection for the holder’s rights as the acceptance of the rule of the transfer of ownership of the place. Its impact becomes evident when the holder, in order to collect the amount of the instrument at maturity, is forced to refer to one of the bankrupt obligors. In such a case, the holder has no choice but to rank alongside other bankrupt creditors. However, given these regulations and upon reviewing the set of articles related to the place in our Commercial Code, it becomes clear that the transfer of ownership of the place in the instrument has not been accepted in the rules related to commercial instruments.