Using Cheques as a Loan Mechanism: “Post-dated Cheques”

The economic difficulties brought by the COVID-19 pandemic, which has influenced the whole world since the beginning of 2020, keep cheque payments and associated issues on the agenda. Post-dated cheques are among these issues.

What is a Post-dated Cheque?

A cheque is a means of payment, is payable at sight, and does not have a maturity date (Turkish Commercial Code (“TCC”) Article 795(1)). TCC considers entries on a cheque stating a maturity date not written (TCC Article 795(1)). On the other hand, there are presentment periods for cheque payments. These periods vary according to the drawing date and place and the payment place written on a cheque (TCC Article 796). Presentment periods are essential to determine the deadline to present a cheque to a bank for payment. These periods are as follows:

Drawing Place

Payment Place

Presentment Period(**)


E.g., Ankara

Same as the drawing place
E.g., Ankara

Ten days
from the drawing date


E.g., Ankara

Different place in the same country
E.g., İstanbul

One month
from the drawing date



E.g., Geneva

Different country
on the same continent(*)
E.g., İstanbul

One month
from the drawing date



E.g., New York, NY

Different country
on a different continent(*)
E.g., Ankara

Three months
from the drawing date

(*) “… cheques having a drawing place in a European country and a payment place in a country with a Mediterranean coast, and similarly having a drawing place in a country with a Mediterranean coast and a payment place in a European country shall be considered to be drawn on the same continent and to be paid on the same continent” (TCC Article 796(2)).

(**) “… periods shall begin on the day following the cheque’s drawing date” (TCC Article 796(3)).


In practice, businesses draw cheques called maturity dated cheques. The particularity of such a cheque is that the drawer specifies the cheque’s drawing date as a later date than the actual drawing date. Stipulating such later date as the drawing date extends the cheque payment date until a later date, as the presentment period for a cheque payment is calculated according to the drawing date written on the cheque. As suggested in the legal jurisprudence, it is more accurate to call these cheques post-dated cheques.

For example, consider that a cheque’s drawing date is 01 June 2020, and the drawing and payment places are Ankara. Such cheque’s presentment period will be 01 June 2020 to 11 June 2020. However, this date range may not be suitable for the drawer to make a payment. The drawer may, as well, be expecting payment from another person, or the drawer may not have in their account as much deposit as the amount of the cheque they plan to draw.

In such cases, if the drawer draws the same cheque with, e.g., 01 September 2020 as the drawing date instead of 01 June 2020, the cheque’s presentment period will be 01 September 2020 to 11 September 2020. This method will give the drawer extra time by extending the presentment period for cheque payment by three months.

Is it Legal to draw a Post-dated Cheque?

Drawing post-dated cheques are customary, and businesses are frequently using this method as a loan mechanism. Reviewing the legislation on cheques, one could notice that the legislator is aware of this practice and allows it. Examples are as follows:

  • “If a cheque holder presents a cheque to a bank for payment before the cheque’s drawing date, such bank shall pay the cheque on the presentment day” (TCC Article 795(2)).

  • “If the provision of a cheque presented before the cheque’s drawing date is not paid in full or in part under Turkish Commercial Code Article 707, no legal proceedings regarding this cheque can be conducted. To conduct legal proceedings regarding the post drawing dated cheque, the holder must present the cheque to the bank within the legal presentment period in line with the cheque’s drawing date, and the bank must process it as a dishonored cheque” (The Law on Cheques Article 3(8)).

  • “Presentment of a cheque for payment to the addressee bank, before the cheque’s drawing date shall not be a valid transaction until 31/12/2020” (The Law on Cheques Provisional Article 3(5)).

These provisions acknowledge that the drawing date of a cheque may be a later date than the actual drawing date, but the approach of the TCC and the Law on Cheques towards this practice differs.

The TCC has brought a kind of sanction for drawing a cheque with a date later than the actual drawing date, stipulating that such cheque will be paid on the presentment date if presented before the cheque’s drawing date.

However, the Law on Cheques supports the post-dated cheque practice and makes the TCC’s sanction ineffective. It prevents the presentment of a post-dated cheque to the addressee bank before the cheque’s drawing date, until 31 December 2020. It also bars conducting legal proceedings if the holder presents the cheque before the cheque’s drawing date and the bank does not pay its provision.

The Supreme Court also acknowledges that a cheque can be drawn post-dated.

Can an Electronic Cheque be drawn as a Post-dated Cheque?

The electronic cheque was one of the most critical issues on the agenda last year; as the medium-term economic program mentioned it, the Ministry of Commerce prepared a draft law on electronic cheques and promissory notes, and the Ministry announced that the draft law would be effective shortly.

As a result of the COVID-19 pandemic, while the hygienic aspect of paper money has become more questionable and electronic payment systems, digital coins, and cryptocurrencies increased their popularity, the electronic cheque has fallen off the agenda. Among the reasons for this is the tremendous impact of medical issues, but the economic importance of paper cheques and established practices must have also contributed.

If the electronic cheque issue comes into question again, whether the post-dated cheque practice will be allowed will be a legal preference and a preference that considers the importance of cheques in commerce.

We expect that the electronic cheques will be in the form of an electronic version of the paper cheque, so there should be no amendments to the legal principles, except the use of the secured electronic signature, and there should be no change in the banks’ intermediary duties.

In this context, if the preference will be to show the actual drawing date of an electronic cheque, using a timestamp while drawing the electronic cheque could be envisaged. On the other hand, if the preference will be to allow drawing post-dated cheques, a structure letting the drawer entering the date of drawing into the system manually while drawing the electronic cheque could be considered. In both cases, since parties will carry out the transactions online, the drawing place and the payment place concepts should not matter, and there should be a sole presentment period in line with the electronic cheque’s actual or post-dated drawing date.

These are mere possibilities for now. There are no legal obstacles to the post-dated cheque practice until the legislator makes any amendments to the cheques’ legislation!

Av. Müge Önal Başer, LL.M.

 

References

  1. This blog post is the revised version of my blog post published on https://turkishlawblog.com/read/article/239/a-frequently-used-solution-in-the-turkish-cheque-law-practice-post-dated-cheque.
  2. Law on Cheques No. 5941 published in the Official Journal dated 20 December 2009 and numbered 27438.
  3. Turkish Commercial Code No. 6102 published in the Official Journal dated 14 February 2011 and numbered 27846.
  4. Presidential Decree on the Approval of the Medium-Term Program (2020-2022) No. 1618, published in the Official Journal dated 04 October 2019 and numbered 30908, 1st Repeated Issue.
  5. Relevant Supreme Court Judgments: 12th Civil Law Chamber, 12 March 2013, E. 2012/30749 K. 2013/8931; 12th Civil Law Chamber, 21 March 2013, E. 2013/1127 K. 2013/10669; 12th Civil Law Chamber, 19 March 2014, E. 2014/5161 K. 2014/7836; General Assembly of Civil Law Chambers, 16 April 2014, E. 2013/1285 K. 2014/531; 12th Civil Law Chamber, 16 June 2014, E. 2014/16321 K. 2014/17475; 12th Civil Law Chamber, 17 February 2015, E. 2015/46 K. 2015/3093; 19th Civil Law Chamber, 01 July 2015, E. 2014/20591 K. 2015/9738; 12th Civil Law Chamber, 07 December 2015, E. 2015/20944 K. 2015/30721, https://www.lexpera.com.tr/ (last visited 18 June 2020); General Assembly of Civil Law Chambers, 02 April 2019, E. 2018/26 K. 2019/396, https://www.yargitay.gov.tr/ (last visited 18 June 2020).
  6. Öztan, Fırat: Kıymetli Evrak Hukuku, Ankara 2017.
  7. Bozer, Ali/Göle, Celal: Kıymetli Evrak Hukuku, Ankara 2018.
  8. Tekinalp, Ünal: “İleri Keşide Tarihli (Vadeli) Çeklere İlişkin Bir Öneri,” Milletlerarası Hukuk ve Milletlerarası Özel Hukuk Bülteni 1999, V. 19, I. 1-2, p. 923-932.
  9. Çöl, Hüseyin Cem: “İleri Tarihli Çeke İlişkin Sorunlar,” Ankara Üniversitesi Hukuk Fakültesi Dergisi 2004, V. 53, I. 1, p. 195-220.
  10. Karabıyık, Ayşegül: “Alternatif Ödeme Aracı Olarak: Elektronik Çek Sistemi (E-Çek) – 1,” Muhasebe ve Finansman Dergisi 2008, V. 38, p. 80-94.
  11. Karabıyık, Ayşegül: “Alternatif Ödeme Aracı Olarak: Elektronik Çek Sistemi (E-Çek) – 2,” Muhasebe ve Finansman Dergisi 2008, V. 39, p. 155-166.
  12. Yıldırım, Ali Haydar: “Türk Hukuku’nda Vadeli Çek (İleri Tarihli Çek) ve Bunun Doğurduğu Sonuçlara İlişkin Bazı Tespitler,” Gazi Üniversitesi Hukuk Fakültesi Dergisi 2017, V. 21, I. 4, p. 91-130.
  13. Sertkaya, İsa/Kalkar, Öznur: “An Efficient Electronic Checkbook Scheme with Mutual Authentication,” Süleyman Demirel Üniversitesi Fen Bilimleri Enstitüsü Dergisi 2019, V. 23, I. 2, p. 590-596.
  14. Bakan Pekcan: Karekodlu bono, elektronik çek ve bono uygulamasını başlatıyoruz, 17 May 2019, https://www.ticaret.gov.tr/haberler/bakan-pekcan-karekodlu-bono-elektronik-cek-ve-bono-uygulamasini-baslatiyoruz (last visited 18 June 2020).