Bailment In Law On Bills Of Exchange 5 October 2016

I.INTRODUCTION

Bailment in law on Bills of Exchange, in other words aval, is regulated under Article 700-702 of Law No. 6102 Turkish Commercial Code(TCC). Regarding to possible financial distrust against who has signature on bill of exchange, individuals who will take over the bill claim additional assurance which could be real or personal. In this context, aval is a personal assurance relating to Law on Bills of Exchange. Aval can be used in both letter of exchange and note, however, it is much preferred in notes than letter of exchange. The acceptor of honour is called ‘avaliste’ whereas the beneficiary of aval is called ‘avalat’.

II. DIFFERENCE BETWEEN AVAL AND BAILMENT

Although aval is a kind of bailment, it brings different consequences according to bailment in Turkish Code of Obligations (TCO). Aval is also called ‘bailment of letter of exchange’ due to the characteristic of personal assurance. Differences of aval from its counterpart in Law of Obligations can be listed as follows;

First of all, aval is a commitment in respect of bills of exchange which is stated on letter of exchange or allonge whereas bailment has to be in written form and it can be written apart from the bill.
In bailment, when the primary debtor is not liable for the obligation, bailor is also not liable for the obligation. However, the obligation of avalist arises from letter of exchange; therefore the acceptor does not have the chance to make the personal pleas of the beneficiary of aval.
Aval is depended to primary debt in respect to form requirements while it is independent in respect to substantial law. As a consequence, according to principle of independence of signatures, in the condition of existence of an incompetent or a forged signature on the bill, validity of other signatures will not be affected.
On the contrary of bailment, the obligation of avalist is not a secondary liability but a joint liability (TCC art.702, 704). However, it is not possible to ask from avaliste before asking from drawee.
If there are more than one avaliste, TCO Art.591 is not applied. This means that, avaliste can only assert personal pleas of his owns against the bearer on the contrary of bailment.
When the avaliste makes a payment, the acceptor acquires an independent right which is rooted from the letter of exchange against to the beneficiary of aval or whoever is liable to beneficiary of aval(TCC Art.702/3).In bailment, it is possible to assert pleas ,which can be made to primary debtor, against bailor.

III. VALIDITY CONDITIONS OF AVAL

In letter of exchange (note, bill of exchange), annotation of aval is written on bill or allonge. Signature which is stated in the front side of bill, under the text of bill or in allonge has the force of aval. However, more than one signature of representative of civil corporation which is onto corporate name (corporate seal) cannot be interpreted as representative’s second signature.

In order to validity of aval, it shall be accepted on the beneficiary of debtor of bill. Consequently, aval which is given to one who is not stated as debtor on bill shall regarded as invalid.

As per TCC Art.702/2, although the obligation that avaliste guarantees is void because of the other reasons from defect of form, commitment of avaliste is valid. In that context, in the situation of invalidity because of defect of form, avalist has the right to assert plea related to this (for example to defect of form can be lack of date of issuance on bill). In addition, if the creditor grants an extension time to beneficiary of aval and it is written down on bill, avaliste can also plead this because this condition can be understood on the text of bill.

As a rule, absolute pleas of beneficiary of aval cannot be asserted by the acceptor of aval to the bearer. The first exception of this rule which is stated above is invalidity due to defect of form. Second exception is that the amount due of bill is paid or settled by the acceptor of aval.

In order to mention an important point, when the endorser who is the beneficiary of aval does not have liability due to no competency or the signature is forged, commitment of aval is still valid and avaliste is still liable because there is no ‘defect of form’. The signature is completed in appearance, in other words it is completed in form, the rest does not have any importance regarding to liability of avaliste.

If the avaliste is not capable for incurring debt( for example; incompetency), these pleas can be asserted to the bearer.

IV. OBLIGATIONS OF THE ACCEPTOR OF AVAL

i. Extent of Obligation

Because of the fact that accepting aval is a kind of assurance, avaliste is liable in the scope of the conditions of liability of the beneficiary. In addition, avaliste is not under the obligation of assuring the whole sum of debt. Providing clear annotation onto the letter of exchange, avaliste can stipulate to be liable for partial debt.

If the beneficiary of aval is partially liable for debt on letter of exchange, avaliste is also liable for same amount.

ii. Conditions of Nonliabilty of The Acceptor of Aval

When the obligation the beneficiary of aval is expired because of the lapse of time, obligation of avaliste is also expired. Avaliste of drawer or endorser subjects to one year period lapse of time against to the last bearer. The right of demand of the endorser who make the payment has six months lapse of time against to the drawer, the previous endorsers and their avalistes.

V. THE RIGHTS OF THE ACCEPTOR OF AVAL

i. Extent of Rights

Avaliste has the rights of person who is liable for the bill. According to this, in case of the payment which is made by avaliste, avaliste shall acquire the rights rooted from the letter of exchange against to the beneficiary of aval and the ones who are liable to beneficiary related to letter of exchange (TCC Art.702/3). However, the possibility of acquiring these rights is discussed when avaliste makes the payment because of the compulsion of payment. If the avaliste makes the payment to the bearer who lost the right to demand, this avaliste cannot acquire these rights.

ii. Rights

By making payment, avaliste does not acquire all rights of the beneficiary of aval but acquire only the rights rooted from the letter of exchange. In a nutshell, avaliste does not become a successor of the beneficiary of aval. These rights are originated from avalist’s persona by law.

The rights of avaliste can briefly be arranged as follows;

Avaliste can indicate someone who accepts and makes the payment of letter of exchange if required (TCC Art.734).
The protest of unacceptance or non-payment shall also be notified to avaliste.
Avaliste can arrange the waiver of protest (TCC Art.722/1). In that context, the person who revokes to avaliste does not have the obligation for issuing a protest. However, this waiver is only a matter for avaliste, it does not enure other debtors.
Avaliste can make personal pleas concerning relation between bearer and avaliste but the personal pleas of the beneficiary of aval cannot be made against bearer by avaliste.
Because of the payment amount of the letter of exchange, avaliste can claim the amount of payment with interests, charges and commission charge from the ones who are liable to the beneficiary of aval (beneficiary, endorser ,drawer).

VI.CONCULUSION

Aval, which is the appearance of bailment in the letter of exchange, is a kind of ‘personal assurance’ in letter of exchange and notes. As well as, aval enables the circulation of the letter of exchange in business life, it is much preferred in notes in practice. Impossibility of asserting absolute pleas and only making pleas about defect of form by avalistes cause that aval has much serious effects and consequences.

Dr. Hasan Pulaşlı, KIYMETLİ EVRAK HUKUKUNUN ESASLARI, 4.Baskı,2015 Ankara.

Dr. Fırat Öztan, KIYMETLİ EVRAK HUKUKUNUN GENEL ESASLARI, 19.Baskı, Ankara.

Türkçe Versiyonu İçin

http://www.kasaroglu.av.tr/tr/28804/Kambiyo-Hukukunda-Kefalet

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