Law · Negotiable Instruments
In a transaction involving a Bill of Exchange, a seller (drawer) requires additional security before agreeing to ship goods on credit to a buyer (drawee). The buyer's bank writes the words 'per aval' on the back of the bill and signs it. What is the legal effect of this 'aval' under international negotiable instrument principles?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The 'aval' acts as a discharge of the buyer's debt, meaning the seller can no longer sue the buyer.
- 2The bank becomes the owner of the goods represented by the bill.
- 3The bank provides a guarantee that the bill will be paid at maturity, becoming liable if the buyer defaults.✓
- 4The bank becomes the primary drawee and must accept the bill immediately.
Correct answer
The bank provides a guarantee that the bill will be paid at maturity, becoming liable if the buyer defaults.
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