Payment of a bill of exchange may be guaranteed by an aval as to the whole or part of its amount. This guarantee may be given by a third person or even by a person who has signed as a party to the bill. The giver of an aval (avalist) is usually a person who is not bound by any bill of exchange yet. However, the law does not prevent a person who has already signed a bill from providing this kind of surety. The person for whom the avalist has committed oneself is called the debtor under aval. If the debtor under aval is not specified in the aval then it holds that it is the drawer. Therefore the obligation of the debtor under aval must be clear from the bill at least formally. The formal principle holds that without the debtor under aval there is no giver of an aval.
The giver of an aval may be guarantor for several persons and several persons may also be guarantors for one debtor. Of course, no guarantee may be assumed for someone who is not bound by a bill of exchange (for example, the drawee who has not accepted the bill of exchange, or the endorsee in case of the endorsement with exemption of liability).
The basic precondition for the avalist's obligation to arise is a formally valid bill of exchange and the written form of the aval in the first place. As for the placement of the aval, Article I, Section 31, Paragraph 1, BECA, states that it should be either in the bill itself or in an allonge. The exact placement is not prescribed by the law so the giver of aval may be signed on the face or on the reverse of the bill. However, if he signs on the reverse of the bill, his mere signature is not sufficient (on this see hereinafter). Besides, the law allows for a copy to be provided with an aval in the same way and with the same effects as the original. Usually, the aval is placed on the face of the bill. Some Czech forms of bills of exchange even bears respective boxes on their faces.
As for the time of giving an aval the law does not prescribe anything for bills of exchange. It is then possible to give an aval for an empty bill of exchange as well as for a bill of exchange after its maturity. Stating a date of the aval is not necessary.
According to the scope of aval, we distinguish a complete, a reduced and a minimal aval:
a) An example of the complete aval in a bill of exchange:
As a guarantee for Karel Èerný
Jan Bílý (signature)
First, an allonge states the guarantee. BECA demonstratively prescribes its wording: "as a guarantee". Other types of the allonge of the same meaning are permitted too, such as "per aval", "as the avalist", etc.
The second essential element is the information about the debtor under aval, i.e. the person who is guaranteed. Unlike the other participants the law does not insist on expressly stating his name. An indirect designation of the debtor suffices for his identification if there are no doubts who he is (for example, "Per aval for the acceptant").
The whole statement of the giver of the aval is completed with his signature. What was mentioned above about signatures of the bill participants applies for his signature, too; there is a possibility of representation of aval, of course.
b) The reduced aval is characterized by lack of information about the debtor under aval. The statement of aval on the bill of exchange consists then only of a signed allonge about aval:
Jan Bílý (signature)
c) There is a completely reduced form of aval constituted by a mere signature on the face of the bill of exchange. Pursuant to Article I, Section 31, Paragraph 3, BECA, it holds that this form establishes an aval (it is the so-called bare aval). However, the necessary precondition is that it is not a mere signature of the drawer (this is only a signature of the drawer) or the drawee (whose signature constitutes an acceptance). Further, the signature must be on the face of the bill of exchange; if it appeared on the reverse of the bill, in an appendix or in a copy, it could be taken for blanket endorsement (comp. Article I, Section 13, Paragraph 2, BECA).
In the reduced and minimal variants the debtor under aval is not expressly stated. In default of this piece of information, the aval is deemed to be given for the drawer (comp. Article I, Section 31, Paragraph 4, BECA).
The position of the debtor under aval is determined in the first place by the content of his own statement. The aval need not cover the whole sum of money as the giver of the aval may limit his obligation to a certain sum. The guarantee may also relieve, with effects against him, the creditor of the protest duty2 and state his own supporting address.
However, he cannot change the obligation from the bill in a manner which would be in conflict with the essence of obligations arising from bills of exchange. Therefore a conditional guarantee (majority opinion) is inadmissible.
The position of the giver of aval is governed by the formal position of the debtor under aval: the giver of aval is bound as the person for whom he has become guarantor (Article I, Section 32, Paragraph 1, BECA). What matters is whether a direct or an indirect debtor is guaranteed. The guarantor for the acceptant is bound as the direct debtor and no preserving acts are need against him (presenting the bill of exchange, protesting). The guarantor for an indirect debtor is then bound in the same way as the latter, i.e. collaterally, and the owner has to do preserving acts. For example, if the endorsee restricted his liability for payment, it has the same consequences for his guarantor. The same applies analogically for limitation periods.
The accessory nature of the guarantor's obligation (his principal connection with the existence and validity of the debtor's obligation) is only formal. It follows from Article I, Section 32, Paragraph 2, BECA, that if there is a formal defect in the signature of the debtor the guarantor is not bound. Therefore if the obligation of the debtor is invalid for a defective form there arises no obligation for the guarantor, either. An example of such formal defects is a signature made by means of facsimile. Other defects in the signature of the debtor that cannot be designated as formal (for example, forcing the signature by violence, the falsified signature, the signature of a person lacking legal capacity or the signature of a non-existing person) cannot effect the arising of the debtor's obligation even if the obligation of the person for whom the giver of aval has become guarantor did not arise at all.
From this follows a conclusion for the position of the guarantor in lodging objections for one's own relationships. The guarantor may lodge only those objections following from his own relationships towards the owner of the bill of exchange and not those following from the relationships of the debtor towards the possessor of the bill. Even if the giver of aval may stipulate the lodging of these objections in a contract with the creditor of the bill, such an agreement only binds the respective creditor and in principle does not affect another assignee of the bill, with the exception of unfair acquisition pursuant to Article I, Section 17, BECA, or acquisition by endorsement with the effect of assignment3
If the giver of aval has paid for the bill of exchange he acquires rights against the person for whom he has become guarantor and against all those who are bound by the bill of exchange towards this person. If his debtor had more givers of aval, these are out of his reach. The content of rights of the giver of aval is determined by Article I, Section 49, BECA. The giver of aval has certain rights even before paying for the bill of exchange, for example, pursuant to Article I, Section 45, Paragraph 2, BECA, he should be informed about non-acceptance of or non-payment for the bill.