Kuwait Court of Cassation principle number 563

Summary: - An agent’s conclusion, within the limits of his agency, of a disposition in the principal’s name. Its implication. Attribution of that disposition to the latter. His disposition outside that agency or without any authorization at all. Its effect. The effects of that disposition are not attributable to the agent unless he ratifies it. - The drawer of a cheque. The person who creates it. Regarded as its primary debtor. Its implication. The cheque must bear the drawer’s signature, seal or fingerprint. Appointment of an agent for the drawer, or a manager or representative, to sign the cheque. Its consequence. The bank must be notified of the agency. The reason. Banks usually obtain a specimen signature of the customer, his agent or his representative and retain these specimens to compare them with the signature of any of them on cheques received bearing the signature of any of them, to verify that they were issued by any of them. Abuse of his authority by any of them, such as drawing cheques from the principal’s cheque book to discharge a debt not owed by the account holder and affixing his signature thereto. Its effect. His liability towards the holder. Its condition. Establishment of his bad faith. - The appellant beneficiary’s admission, in respect of the cheques drawn on the account of Burj Al-Kuwait Decoration Establishment owned by the respondent, that the latter did not sign them, and his denial that he authorized the person who signed them to issue them. The challenged judgment’s dismissal of the action to compel the respondent to pay the value of those cheques, based merely on the statement that the cheque did not bear the latter’s signature, without examining whether the signatory to the cheques in dispute had representative authority and whether they were issued within that authority. Inadequate reasoning leading it to contravene the law and err in its application. Rule: The purport of Articles 715,61,57 of the Civil Code—as established in this Court’s case law—is that if an agent concludes a disposition in the principal’s name within the limits of his agency, everything resulting from that disposition is attributable to the latter. If, however, he concludes it outside the limits of that agency or without any authorization at all, its effects are not attributable to the principal unless he ratifies that disposition. It is established that the drawer of a cheque is the person who creates it and is thus regarded as its primary debtor. Accordingly, the cheque must bear the drawer’s signature, seal or fingerprint. If the drawer has an agent, manager or representative, the bank must be notified of him, since banks usually obtain a specimen signature of the customer, his agent or his representative and retain these specimens to compare them with the signature of any of them on cheques received bearing the signature of any of them. They can thereby verify that these cheques were issued by any of them. If the representative, manager or agent abuses his authority and draws cheques from the principal’s cheque book to discharge a debt not owed by the account holder and affixes his signature thereto, he is liable towards the holder unless his bad faith is established. That being so, and since the appellant—the beneficiary—admitted that the respondent was not the person who signed the cheques forming the basis of the action, and the latter denied authorizing the person who signed it to issue it, yet the challenged judgment based its ruling reversing the first-instance judgment and dismissing the action to compel the respondent to pay the value of the cheques drawn on the account of Burj Al-Kuwait Decoration Establishment owned by the respondent merely on the statement that the cheque did not bear the respondent’s signature, without examining whether the signatory to the cheques in dispute had representative authority and whether or not they were issued within that authority, it is vitiated by inadequate reasoning, which led it to contravene the law and err in its application, thereby vitiating it and requiring that it be quashed.