The cheque under the Bulgarian Commerce Act
There is no specific legislative provision in the Cheque Contract Act contract, thereby assuming that cheque contracts are concluded under the rules of Art. 13 and Art. 14 OCA, and in principle the offer is made by the issuer. There is no rule against it being issued by the bank. While there are no explicit requirements and restrictions, the offer is informal (it can be made orally).
A contract, under which the bank is obliged to pay cheques issued by the issuer and the issuer is obliged to provide funds for the payment of cheques drawn thereby. Parties - one party is the payer bank and the other party is the issuer of the cheque. It is possible for the cheque contract to be concluded by a third party, in this case the bank is obliged to pay cheque drawn by the issuer. Usually the said third party provides the necessary funds to pay the cheques.
Rights and duties of the parties. Duties of the payer bank:
- To pay the issued cheques, such that there is no obligation on the bank to pay cheques that are void for formalities, i.e. missing prerequisites. The bank is not obliged to pay cheques that were requested outside the stipulated time, i.e. before the expiry of the 8-day period. The bank is not obliged to pay fraudulent checks or checks of persons who are not legal holders of the cheque. The bank does not owe any payment on cheques if the issuer did not provide the relevant coverage.
- the cheque contract may confer an obligation on the bank to perform subsequent instructions by the issuer. For example, instructions by the issuer that the bank temporarily stop payment on checks issued thereby.
- the cheque contract may confer an obligation on the bank to issue a checkbook containing the appropriate cheque forms.
Duties of the issuer:
- to provide the bank with a signature sample, and if they have authorised a third party to issue cheques, the issuer shall provide a signature sample of the representative and the act on whose basis derives the representative power.
- to provide the funds needed to pay the checks drawn thereby, such that the parties to the cheque contract may agree that the bank pay at their own expense, however, in this case there is an obligation on the issuer to recover the costs of the bank.
- The issuer is obliged to protect the forms provided and take action against loss, theft or tampering thereof. If any of these circumstances arises, the issuer shall notify the payer bank.
- The cheque contract may confer an obligation on the issuer to issue cheques of a certain value.
- The cheque contract may confer an obligation 0n the issuer to pay a commission to the bank.
Particularities of the termination of cheque contracts:
- associated with the fact that the cheque contract is intuitu personae, which means that the contract may be terminated by either of the two parties.
- it may be withdrawn by the issuer, respectively, it may be terminated based on a refusal by the payer bank. In terms of the withdrawal and refusal, the relevant provisions of the OCA apply, regulating procurement contracts.
- The bank may unilaterally terminate the contract if the issuer does not provide the necessary cash collateral or fails to fulfill their obligations to preserve the cheque forms. The cheque contract is usually accompanied by additional agreements between the parties, where such agreements can be expressed in concluding a loan agreement, a current account overdraft contract, or a contract for deposit. Based on these additional agreements, the issuer provides the necessary funds for the payment of cheques issued thereby.
The coverage on the cheque should be in place at the time of payment of the cheque (i.e. at the time of issuance such may not exist). If there is no such coverage, a bounced cheque scenario occurs. If the issuer has issued a bounced cheque, it is a breach of their obligations under the contract and it gives rise to contractual liability for their account.
Issuing a cheque means transferring ownership of the security and the related rights. The cheque is treated as issued upon its signing and its delivery to the underwriter. In this regard, the issue of the cheque also has a real element - it is not enough to write a cheque, it must be delivered to the underwriter in order for its consequences to ensue.
Once issued, it may not be transferred as security. Cheque notes is delivered through endorsement, the name check is delivered through cession and we still have a factual element of delivery. Cheque bearers are assumed to be transferred by the FL which has a delivery effect and there is still a transfer of security. The cheque is a security, and accordingly the bearer must request payment within an 8-day period. This request is considered a legal action and it includes presenting the cheque as security and includes a request for payment. Once the check has been requested, the legal default interest commences, which is borne by the issuer.
The payment on the cheque may be cash and non-cash. The bank may pay with their own funds and then suggest that they have a claim under Art. 55 OCA against the issuer. The bank may refuse to pay even if the cheque complies with the legal requirements, and even when the relevant coverage of the issuer is in place. Non-payment by the bank on the cheque must be held to protest. Protesting against the check, as well as the protesting of a bill of exchange are guarding notary proceedings.
After establishing the non-payment, in favour of the bearer of the cheque occur regress rights against the issuer, endorsers, and avalists.