Commercial Instruments in Morocco: Bill of Exchange and Promissory Note

In brief: Commercial instruments in Morocco — primarily the bill of exchange and the promissory note — are governed by Articles 159 to 238 of the Commercial Code. The bill of exchange is a document by which the drawer orders the drawee to pay a specified sum to the beneficiary on a fixed due date. It must contain 8 mandatory particulars (Art. 159). The promissory note (Art. 232-238) is a direct commitment to pay. These credit and payment instruments are transferable by endorsement and may be guaranteed by an aval. Legal recourse on these instruments is subject to a 3-year limitation period (Art. 228).

The bill of exchange: definition and legal regime

The bill of exchange (or trade bill) is the main commercial instrument used in Moroccan business practice. It is a document by which one person, the drawer, orders another person, the drawee, to pay a specified sum of money to a beneficiary (or holder) on a determined date.

Three parties are involved in a bill of exchange:

The drawer: the person who creates the bill of exchange and gives the order to pay
The drawee: the person to whom the order to pay is addressed (usually the drawer’s debtor)
The beneficiary (or holder): the person in whose favour payment is to be made

The bill of exchange serves a dual function in commerce: it is both a payment instrument (it allows settlement of a debt) and a credit instrument (it grants the drawee time until the due date).

Mandatory particulars of the bill of exchange (Art. 159)

Article 159 of the Moroccan Commercial Code lists eight mandatory particulars that the bill of exchange must contain, on pain of nullity:

The designation “bill of exchange” inserted in the body of the instrument
An unconditional order to pay a specified sum
The name of the person who must pay (the drawee)
The indication of the due date
The indication of the place where payment is to be made
The name of the person to whom or to whose order payment is to be made (the beneficiary)
The indication of the date and place where the bill is drawn
The signature of the drawer

The absence of any of these particulars renders the instrument null as a bill of exchange, except for the substitutions provided by law: in the absence of a due date, the bill of exchange is deemed payable on demand; in the absence of a place of payment, the domicile of the drawee is deemed the place of payment.

Acceptance of the bill of exchange (Art. 174)

Principle of acceptance

Acceptance is the act by which the drawee undertakes to pay the bill of exchange on the due date. It is evidenced by the words “accepted” followed by the drawee’s signature affixed on the face of the instrument.

Acceptance is optional: the drawer may create a bill of exchange without first obtaining the drawee’s acceptance. However, acceptance offers a considerable advantage for the holder as it makes the drawee a direct and principal debtor.

Refusal of acceptance

The drawee’s refusal of acceptance allows the holder to exercise early recourse against the drawer and endorsers, even before the due date. The holder must have the refusal of acceptance officially recorded through a protest for non-acceptance.

Endorsement of the bill of exchange

The bill of exchange is a negotiable instrument that can be transferred by endorsement. The Commercial Code distinguishes three types of endorsement:

Transfer endorsement

Transfer endorsement is the normal method of transferring a bill of exchange. It transfers to the new holder (endorsee) all rights arising from the instrument. The endorser writes on the back of the instrument: “Pay to the order of [endorsee’s name]” followed by their signature. Transfer endorsement confers on the endorsee an autonomous right: it is not affected by any defences that the drawee could raise against previous holders.

Endorsement by procuration

Endorsement by procuration (or agency endorsement) does not transfer ownership of the instrument. It grants the agent the power to collect the amount of the bill of exchange on behalf of the endorser. It is identified by the words “value for collection” or “for collection”.

Pledge endorsement

Pledge endorsement delivers the bill of exchange as security to the endorser’s creditor. The pledge holder may exercise all rights arising from the instrument but may only transfer it by endorsement by procuration. The usual wording is “value as security”.

Aval (Art. 180)

The aval is a guarantee of payment of the bill of exchange provided by a third party (the guarantor) or by a signatory of the instrument. Article 180 of the Commercial Code provides that the aval may be given on behalf of the drawer, the accepting drawee, or an endorser.

The aval is expressed by the words “good for aval” followed by the guarantor’s signature, affixed on the instrument or on an allonge. The guarantor is liable in the same manner as the person for whom they have guaranteed. Their commitment is autonomous: it remains valid even if the guaranteed obligation is void for any reason other than a defect of form.

Due date and payment

The four types of due date

Article 181 of the Commercial Code recognizes four methods of setting the due date:

On demand: payable upon presentation to the drawee
At a certain period after sight: the due date runs from the acceptance or the protest for non-acceptance
At a certain period after date: the due date is calculated from the date of creation of the instrument
On a fixed date: the due date is set at a specific date

Payment of the bill of exchange

The holder must present the bill of exchange for payment on the day of the due date or on one of the two following business days. Payment discharges the drawee and all signatories of the instrument. The drawee may require the holder to deliver the receipted instrument.

Protest and legal recourse (Art. 207)

The protest

The protest is an authenticated document drawn up by a bailiff that officially records the refusal of payment (protest for non-payment) or the refusal of acceptance (protest for non-acceptance). Article 207 sets the deadline for drawing up a protest for non-payment: it must be established within five business days following the due date.

The protest is a necessary condition for exercising legal recourse, unless there is a clause for return without costs.

Legal recourse

In case of non-payment on the due date, the holder has legal recourse against all signatories of the instrument (drawer, endorsers, guarantors). This recourse is joint and several: the holder may pursue any of the signatories, individually or collectively, without being required to follow the order in which they became obligated.

The holder may claim:

The amount of the unpaid bill of exchange
Interest at the legal rate from the due date
Protest costs, notification costs and other legitimate expenses

Limitation period (Art. 228)

Article 228 of the Commercial Code sets the limitation periods for legal actions:

3 years for the holder’s action against the accepting drawee (from the due date)
1 year for the holder’s actions against endorsers and the drawer (from the date of protest or due date if there is a clause for return without costs)
6 months for actions of endorsers against each other and against the drawer

The promissory note (Art. 232-238)

Definition and differences from the bill of exchange

The promissory note is an instrument by which one person, the maker, undertakes to pay a specified sum of money to a beneficiary or to their order on a determined date. Unlike the bill of exchange, the promissory note involves only two parties (not three): there is no drawee since the maker is both the creator of the instrument and the person who undertakes to pay.

Another major difference: the promissory note is not subject to acceptance, since the maker is committed to payment from the outset. The maker of the promissory note is treated in the same way as the accepting drawee of a bill of exchange.

Mandatory particulars (Art. 232)

The promissory note must contain the following particulars:

The clause “to order” or the designation “promissory note”
An unconditional promise to pay a specified sum
The indication of the due date
The place of payment
The name of the beneficiary
The date and place of issue
The signature of the maker

Applicable legal regime

Article 233 of the Commercial Code provides that the rules relating to the bill of exchange apply to the promissory note, insofar as they are not incompatible with its nature. Thus, the provisions on endorsement, aval, payment, protest and legal recourse are applicable to the promissory note.

Practical importance of commercial instruments in Morocco

Commercial instruments remain essential tools in Moroccan business, particularly for business-to-business (B2B) transactions. They allow the formalization of receivables, the granting of payment terms and the mobilization of receivables with banks (discounting). Their use is closely linked to compliance with payment deadlines between traders.

The cheque, although not strictly speaking a commercial instrument (it is a demand payment instrument), is subject to a specific legal regime set out in Articles 239 to 328 of the Commercial Code.

Upsilon Consulting, a member of the Order of Chartered Accountants, assists you in the management of your commercial instruments and cash flow monitoring. Contact our experts for personalized advice.

Frequently asked questions

What is the difference between a bill of exchange and a promissory note?

The bill of exchange involves three parties (drawer, drawee and beneficiary): the drawer orders the drawee to pay the beneficiary. The promissory note involves only two parties: the maker undertakes directly to pay the beneficiary. Consequently, the promissory note does not require acceptance since the maker is already committed to payment upon creation of the instrument.

What happens if a mandatory particular is missing from a bill of exchange?

The absence of any of the eight mandatory particulars provided for by Article 159 of the Commercial Code renders the instrument null as a bill of exchange. However, the instrument may potentially be valid as an acknowledgment of debt or prima facie evidence under ordinary law. The law also provides for substitutions: in the absence of a due date, the bill of exchange is deemed payable on demand.

Can endorsement of a commercial instrument be refused?

No, unless the bill of exchange bears the clause “not to order” (or “non-endorsable”). In that case, the instrument can only be transferred through the forms of assignment of debt under civil law. In the absence of this clause, any holder may freely endorse the instrument to a third party, without needing the consent of the drawee or the drawer.

READ ALSO:

This article is written by the team of chartered accountants at Upsilon Consulting, a firm registered with the Order of Chartered Accountants (OEC) of Morocco.

Need assistance with cash flow management and commercial instruments? Contact Upsilon Consulting for tailored advice.

Commercial Instruments in Morocco: Bill of Exchange and Promissory Note | Upsilon Consulting