Security Cheque

A security cheque is a cheque handed over not as immediate payment but as a guarantee — for a loan, a lease, a credit facility or contract performance — usually undated or post-dated, to be presented only if the underlying obligation is breached. The practice is widespread in the UAE despite sitting awkwardly with the legal nature of a cheque as an instrument payable on sight. Following the cheque reforms in the Commercial Transactions Law, a bounced cheque is primarily enforced through civil execution — the cheque itself is an execution document — while criminal liability is reserved for fraud-type conduct such as knowingly drawing on a closed account. Disputes typically revolve around whether the holder filled in amounts or dates contrary to the agreement, and whether the secured debt was actually due. It matters because signing security cheques creates exposure that can outlast the deal. You meet them in tenancy files, bank facilities, car finance and supplier credit arrangements.