Bill of Exchange Law and Legal Definition

A bill of exchange is a writing by a party (maker or drawer) ordering another (payor) to pay a certain amount to a third party (payee). It is also referred to as a draft. If the bill of exchange is drawn on a bank, it is called a bank draft. If it is drawn on another party, it is called a trade draft. A bill of exchange drawn on a bank account is a "check."A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date.

They can be drawn by individuals or banks and are generally transferable by endorsements. The difference between a promissory note and a bill of exchange is that a bill of exchange is transferable and can bind one party to pay a third party that was not involved in its creation. Sometimes a bill of exchange will simply be called a draft, but a draft is always negotiable (transferable by endorsement), whereas a bill of exchange may not be negotiable. The party to whom a bill of exchange is addressed is called the acceptor.

The following is a United Nations convention dealing with bills of exchange:
United Nations Convention on International Bills of Exchange and International Promissory Notes
CHAPTER I. SPHERE OF APPLICATION AND FORM OF THE INSTRUMENT

Article 1

  1. This Convention applies to an international bill of exchange when it contains the heading "International bill of exchange (UNCITRAL Convention)" and also contains in its text the words "International bill of exchange (UNCITRAL Convention)".
  2. This Convention applies to an international promissory note when it contains the heading "International promissory note (UNCITRAL Convention)" and also contains in its text the words "International promissory note (UNCITRAL Convention)".
  3. This Convention does not apply to cheques.

Article 2

An international bill of exchange is a bill of exchange which specifies at least two of the following places and indicates that any two so specified are situated in different States:

  1. The place where the bill is drawn;
  2. The place indicated next to the signature of the drawer;
  3. The place indicated next to the name of the drawee;
  4. The place indicated next to the name of the payee;
  5. The place of payment, provided that either the place where the bill is drawn or the place of payment is specified on the bill and that such place is situated in a Contracting State.

An international promissory note is a promissory note which specifies at least two of the following places and indicates that any two so specified are situated in different States:

  1. The place where the note is made;
  2. The place indicated next to the signature of the maker;
  3. The place indicated next to the name of the payee;
  4. The place of payment, provided that the place of payment is specified on the note and that such place is situated in a Contracting State.

This Convention does not deal with the question of sanctions that may be imposed under national law in cases where an incorrect or false statement has been made on an instrument in respect of a place referred to in paragraph 1 or 2 of this article. However, any such sanctions shall not affect the validity of the instrument or the application of this Convention.

Article 3

A bill of exchange is a written instrument which:

  1. Contains an unconditional order whereby the drawer directs the drawee to pay a definite sum of money to the payee or to his order;
  2. Is payable on demand or at a definite time;
  3. Is dated;
  4. Is signed by the drawer.

A promissory note is a written instrument which:

  1. Contains an unconditional promise whereby the maker undertakes to pay a definite sum of money to the payee or to his order;
  2. Is payable on demand or at a definite time;
  3. Is dated;
  4. Is signed by the maker.

CHAPTER II. INTERPRETATION
Section 1. General provisions

Article 4

In the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international transactions.

Article 5

In this Convention:

  1. "Bill" means an international bill of exchange governed by this Convention;
  2. "Note" means an international promissory note governed by this Convention;
  3. "Instrument" means a bill or a note;
  4. "Drawee" means a person on whom a bill is drawn and who has not accepted it;
  5. "Payee" means a person in whose favour the drawer directs payment to be made or to whom the maker promises to pay;
  6. "Holder" means a person in possession of an instrument in accordance with article 15;
  7. "Protected holder" means a holder who meets the requirements of article 29;
  8. "Guarantor" means any person who undertakes an obligation of guarantee under article 46, whether governed by paragraph 4 (b) ("guaranteed") or paragraph 4 (c) ("aval") of article 47;
  9. "Party" means a person who has signed an instrument as drawer, maker, acceptor, endorser or guarantor;
  10. "Maturity" means the time of payment referred to in paragraphs 4, 5, 6 and 7 of article 9;
  11. "Signature" means a handwritten signature, its facsimile or an equivalent authentication effected by any other means; "forged signature" includes a signature by the wrongful use of such means;
  12. "Money" or "currency" includes a monetary unit of account which is established by an intergovernmental institution or by agreement between two or more States, provided that this Convention shall apply without prejudice to the rules of the intergovernmental institution or to the stipulations of the agreement.

Article 6

For the purposes of this Convention, a person is considered to have knowledge of a fact if he has actual knowledge of that fact or could not have been unaware of its existence.

Section 2.
Interpretation of formal requirements

Article 7

The sum payable by an instrument is deemed to be a definite sum although the instrument states that it is to be paid:

  1. With interest;
  2. By instalments at successive dates;
  3. By instalments at successive dates with a stipulation in the instrument that upon default in payment of any instalment the unpaid balance becomes due;
  4. According to a rate of exchange indicated in the instrument or to be determined as directed by the instrument; or
  5. In a currency other than the currency in which the sum is expressed in the instrument.

Article 8

  1. If there is a discrepancy between the sum expressed in words and the sum expressed in figures, the sum payable by the instrument is the sum expressed in words.
  2. If the sum is expressed more than once in words, and there is a discrepancy, the sum payable is the smaller sum. The same rule applies if the sum is expressed more than once in figures only, and there is a discrepancy.
  3. If the sum is expressed in a currency having the same description as that of at least one other State than the State where payment is to be made, as indicated in the instrument, and the specified currency is not identified as the currency of any particular State, the currency is to be considered as the currency of the State where payment is to be made.
  4. If an instrument states that the sum is to be paid with interest, without specifying the date from which interest is to run, interest runs from the date of the instrument.
  5. A stipulation stating that the sum is to be paid with interest is deemed not to have been written on the instrument unless it indicates the rate at which interest is to be paid.
  6. A rate at which interest is to be paid may be expressed either as a definite rate or as a variable rate. For a variable rate to qualify for this purpose, it must vary in relation to one or more reference rates of interest in accordance with provisions stipulated in the instrument and each such reference rate must be published or otherwise available to the public and not be subject, directly or indirectly, to unilateral determination by a person who is named in the instrument at the time the bill is drawn or the note is made, unless the person is named only in the reference rate provisions.
  7. If the rate at which interest is to be paid is expressed as a variable rate, it may be stipulated expressly in the instrument that such rate shall not be less than or exceed a specified rate of interest, or that the variations are otherwise limited.
  8. If a variable rate does not qualify under paragraph 6 of this article or for any reason it is not possible to determine the numerical value of the variable rate for any period, interest shall be payable for the relevant period at the rate calculated in accordance with paragraph 2 of article 70.

Article 9

An instrument is deemed to be payable on demand:

  1. If it states that it is payable at sight or on demand or on presentment or if it contains words of similar import; or
  2. If no time of payment is expressed.

An instrument payable at a definite time which is accepted or endorsed or guaranteed after maturity is an instrument payable on demand as regards the acceptor, the endorser or the guarantor.

An instrument is deemed to be payable at a definite time if it states that it is payable:

  1. On a stated date or at a fixed period after a stated date or at a fixed period after the date of the instrument;
  2. At a fixed period after sight;
  3. By instalments at successive dates; or
  4. By instalments at successive dates with the stipulation in the instrument that upon default in payment of any instalment the unpaid balance becomes due.

The time of payment of an instrument payable at a fixed period after date is determined by reference to the date of the instrument.

The time of payment of a bill payable at a fixed period after sight is determined by the date of acceptance or, if the bill is dishonoured by non-acceptance, by the date of protest or, if protest is dispensed with, by the date of dishonour.

The time of payment of an instrument payable on demand is the date on which the instrument is presented for payment.

The time of payment of a note payable at a fixed period after sight is determined by the date of the visa signed by the maker on the note or, if his visa is refused, by the date of presentment.

If an instrument is drawn, or made, payable one or more months after a stated date or after the date of the instrument or after sight, the instrument is payable on the corresponding date of the month when payment must be made. If there is no corresponding date, the instrument is payable on the last day of that month.

Article 10

A bill may be drawn:

  1. By two or more drawers;
  2. Payable to two or more payees.

A note may be made:

  1. By two or more makers;
  2. Payable to two or more payees.

If an instrument is payable to two or more payees in the alternative, it is payable to any one of them and any one of them in possession of the instrument may exercise the rights of a holder. In any other case the instrument is payable to all of them and the rights of a holder may be exercised only by all of them.

Article 11

A bill may be drawn by the drawer:

  1. On himself;
  2. Payable to his order.

Section 3.

Completion of an incomplete instrument

Article 12

  1. An incomplete instrument which satisfies the requirements set out in paragraph 1 of article 1 and bears the signature of the drawer or the acceptance of the drawee, or which satisfies the requirements set out in paragraph 2 of article 1 and paragraph 2 (d) of article 3, but which lacks other elements pertaining to one or more of the requirements set out in articles 2 and 3, may be completed, and the instrument so completed is effective as a bill or a note.
  2. If such an instrument is completed without authority or otherwise than in accordance with the authority given:
  1. A party who signed the instrument before the completion may invoke such lack of authority as a defence against a holder who had knowledge of such lack of authority when he became a holder;
  2. A party who signed the instrument after the completion is liable according to the terms of the instrument so completed.

CHAPTER III.
TRANSFER

Article 13

An instrument is transferred:

  1. By endorsement and delivery of the instrument by the endorser to the endorsee; or
  2. By mere delivery of the instrument if the last endorsement is in blank.

Article 14

An endorsement must be written on the instrument or on a slip affixed thereto ("allonge"). It must be signed.

An endorsement may be:

  1. In blank, that is, by a signature alone or by a signature accompanied by a statement to the effect that the instrument is payable to a person in possession of it;
  2. Special, that is, by a signature accompanied by an indication of the person to whom the instrument is payable.

A signature alone, other than that of the drawee, is an endorsement only if placed on the back of the instrument.

Article 15

A person is a holder if he is:

  1. The payee in possession of the instrument; or
  2. In possession of an instrument which has been endorsed to him, or on which the last endorsement is in blank, and on which there appears an uninterrupted series of endorsements, even if any endorsement was forged or was signed by an agent without authority.

If an endorsement in blank is followed by another endorsement, the person who signed this last endorsement is deemed to be an endorsee by the endorsement in blank.

A person is not prevented from being a holder by the fact that the instrument was obtained by him or any previous holder under circumstances, including incapacity or fraud, duress or mistake of any kind, that would give rise to a claim to, or a defence against liability on, the instrument.

Article 16

The holder of an instrument on which the last endorsement is in blank may:

  1. Further endorse it either by an endorsement in blank or by a special endorsement;
  2. Convert the blank endorsement into a special endorsement by indicating in the endorsement that the instrument is payable to himself or to some other specified person; or
  3. Transfer the instrument in accordance with subparagraph (b) ofarticle 13.

Article 17

  1. If the drawer or the maker has inserted in the instrument such words as "not negotiable", "not transferable", "not to order", "pay (X) only", or words of similar import, the instrument may not be transferred except for purposes of collection, and any endorsement, even if it does not contain words authorizing the endorsee to collect the instrument, is deemed to be an endorsement for collection.
  2. If an endorsement contains the words "not negotiable", "not transferable", "not to order", "pay (X) only", or words of similar import, the instrument may not be transferred further except for purposes of collection, and any subsequent endorsement, even if it does not contain words authorizing the endorsee to collect the instrument, is deemed to be an endorsement for collection.

Article 18

  1. An endorsement must be unconditional.
  2. A conditional endorsement transfers the instrument whether or not the condition is fulfilled. The condition is ineffective as to those parties and transferees who are subsequent to the endorsee.

Article 19

An endorsement in respect of a part of the sum due under the instrument is ineffective as an endorsement.

Article 20

If there are two or more endorsements, it is presumed, unless the contrary is proved, that each endorsement was made in the order in which it appears on the instrument.

Article 21

If an endorsement contains the words "for collection", "for deposit", "value in collection", "by procuration", "pay any bank", or words of similar import authorizing the endorsee to collect the instrument, the endorsee is a holder who:

  1. May exercise all rights arising out of the instrument;
  2. May endorse the instrument only for purposes of collection;
  3. Is subject only to the claims and defences which may be set up against the endorser.

The endorser for collection is not liable on the instrument to any subsequent holder.

Article 22

If an endorsement contains the words "value in security", "value in pledge", or any other words indicating a pledge, the endorsee is a holder who:

  1. May exercise all rights arising out of the instrument;
  2. May endorse the instrument only for purposes of collection;
  3. Is subject only to the claims and defences specified in article 28 or article 30.

If such an endorsee endorses for collection, he is not liable on the instrument to any subsequent holder.

Article 23

The holder of an instrument may transfer it to a prior party or to the drawee in accordance with article 13; however, if the transferee has previously been a holder of the instrument, no endorsement is required, and any endorsement which would prevent him from qualifying as a holder may be struck out.

Article 24

An instrument may be transferred in accordance with article 13 after maturity, except by the drawee, the acceptor or the maker.

Article 25

If an endorsement is forged, the person whose endorsement is forged, or a party who signed the instrument before the forgery, has the right to recover compensation for any damage that he may have suffered because of the forgery against:

  1. The Forger;
  2. The person to whom the instrument was directly transferred by the forger;
  3. A party or the drawee who paid the instrument to the forger directly or through one or more endorsees for collection.

However, an endorsee for collection is not liable under paragraph 1 of this article if he is without knowledge of the forgery:

  1. At the time he pays the principal or advises him of the receipt of payment; or
  2. At the time he receives payment, if this is later, unless his lack of knowledge is due to his failure to act in good faith or to exercise reasonable care.

Furthermore, a party or the drawee who pays an instrument is not liable under paragraph 1 of this article if, at the time he pays the instrument, he is without knowledge of the forgery, unless his lack of knowledge is due to his failure to act in good faith or to exercise reasonable care.

Except as against the forger, the damages recoverable under paragraph 1 of this article may not exceed the amount referred to in article 70 or article 71.

Article 26

If an endorsement is made by an agent without authority or power to bind his principal in the matter, the principal, or a party who signed the instrument before such endorsement, has the right to recover compensation for any damage that he may have suffered because of such endorsement against:

  1. The agent;
  2. The person to whom the instrument was directly transferred by the agent;
  3. A party or the drawee who paid the instrument to the agent directly or through one or more endorsees for collection.

However, an endorsee for collection is not liable under paragraph 1 of this article if he is without knowledge that the endorsement does not bind the principal:

  1. At the time he pays the principal or advises him of the receipt of payment; or
  2. At the time he receives payment, if this is later, unless his lack of knowledge is due to his failure to act in good faith or to exercise reasonable care.

Furthermore, a party or the drawee who pays an instrument is not liable under paragraph 1 of this article if, at the time he pays the instrument, he is without knowledge that the endorsement does not bind the principal, unless his lack of knowledge is due to his failure to act in good faith or to exercise reasonable care.

Except as against the agent, the damages recoverable under paragraph 1 of this article may not exceed the amount referred to in article 70 or article 71.

CHAPTER IV. RIGHTS AND LIABILITIES
Section 1. The rights of a holder and of a protected holder

Article 27

  1. The holder of an instrument has all the rights conferred on him by this Convention against the parties to the instrument.
  2. The holder may transfer the instrument in accordance with article 13.

Article 28

A party may set up against a holder who is not a protected holder:

  1. Any defence that may be set up against a protected holder in accordance with paragraph 1 of article 30;
  2. Any defence based on the underlying transaction between himself and the drawer or between himself and his transferee, but only if the holder took the instrument with knowledge of such defence or if he obtained the instrument by fraud or theft or participated at any time in a fraud or theft concerning it;
  3. Any defence arising from the circumstances as a result of which he became a party, but only if the holder took the instrument with knowledge of such defence or if he obtained the instrument by fraud or theft or participated at any time in a fraud or theft concerning it;
  4. Any defence which may be raised against an action in contract between himself and the holder;
  5. Any other defence available under this Convention.

The rights to an instrument of a holder who is not a protected holder are subject to any valid claim to the instrument on the part of any person, but only if he took the instrument with knowledge of such claim or if he obtained the instrument by fraud or theft or participated at any time in a fraud or theft concerning it.

A holder who takes an instrument after the expiration of the time-limit for presentment for payment is subject to any claim to, or defence against liability on, the instrument to which his transferor is subject.

A party may not raise as a defence against a holder who is not a protected holder the fact that a third person has a claim to the instrument unless:

  1. The third person asserted a valid claim to the instrument; or
  2. The holder acquired the instrument by theft or forged the signature of the payee or an endorsee, or participated in the theft or the forgery.

Article 29

"Protected holder" means the holder of an instrument which was complete when he took it or which was incomplete within the meaning of paragraph 1 of article 12 and was completed in accordance with authority given, provided that when he became a holder:

  1. He was without knowledge of a defence against liability on the instrument referred to in paragraphs 1 (a), (b), (c) and (e) of article 28;
  2. He was without knowledge of a valid claim to the instrument of any person;
  3. He was without knowledge of the fact that it had been dishonoured by non-acceptance or by non-payment;
  4. The time-limit provided by article 55 for presentment of that instrument for payment had not expired;
  5. He did not obtain the instrument by fraud or theft or participate in a fraud or theft concerning it.

Article 30

A party may not set up against a protected holder any defence except:

  1. Defences under paragraph 1 of article 33, article 34, paragraph 1 of article 35, paragraph 3 of article 36, paragraph 1 of article 53, paragraph 1 of article 57, paragraph 1 of article 63 and article 84 of this Convention;
  2. Defences based on the underlying transaction between himself and such holder or arising from any fraudulent act on the part of such holder in obtaining the signature on the instrument of that party;
  3. Defences based on his incapacity to incur liability on the instrument or on the fact that he signed without knowledge that his signature made him a party to the instrument, provided that his lack of knowledge was not due to his negligence and provided that he was fraudulently induced so to sign.

The rights to an instrument of a protected holder are not subject to any claim to the instrument on the part of any person, except a valid claim arising from the underlying transaction between himself and the person by whom the claim is raised.

Article 31

The transfer of an instrument by a protected holder vests in any subsequent holder the rights to and on the instrument which the protected holder had.

Those rights are not vested in a subsequent holder if:

  1. He participated in a transaction which gives rise to a claim to, or a defence against liability on, the instrument;
  2. He has previously been a holder, but not a protected holder.

Article 32

Every holder is presumed to be a protected holder unless the contrary is proved.

Section 2. Liabilities of the parties
A. General provisions

Article 33

  1. Subject to the provisions of articles 34 and 36, a person is not liable on an instrument unless he signs it.
  2. A person who signs an instrument in a name which is not his own is liable as if he had signed it in his own name.

Article 34

A forged signature on an instrument does not impose any liability on the person whose signature was forged. However, if he consents to be bound by the forged signature or represents that it is his own, he is liable as if he had signed the instrument himself.

Article 35

If an instrument is materially altered:

  1. A party who signs it after the material alteration is liable according to the terms of the altered text;
  2. A party who signs it before the material alteration is liable according to the terms of the original text. However, if a party makes, authorizes or assents to a material alteration, he is liable according to the terms of the altered text.

A signature is presumed to have been placed on the instrument after the material alteration unless the contrary is proved.

Any alteration is material which modifies the written undertaking on the instrument of any party in any respect.

Article 36

  1. An instrument may be signed by an agent.
  2. The signature of an agent placed by him on an instrument with the authority of his principal and showing on the instrument that he is signing in a representative capacity for that named principal, or the signature of a principal placed on the instrument by an agent with his authority, imposes liability on the principal and not on the agent.
  3. A signature placed on an instrument by a person as agent but who lacks authority to sign or exceeds his authority, or by an agent who has authority to sign but who does not show on the instrument that he is signing in a representative capacity for a named person, or who shows on the instrument that he is signing in a representative capacity but does not name the person whom he represents, imposes liability on the person signing and not on the person whom he purports to represent.
  4. The question whether a signature was placed on the instrument in a representative capacity may be determined only by reference to what appears on the instrument.
  5. A person who is liable pursuant to paragraph 3 of this article and who pays the instrument has the same rights as the person for whom he purported to act would have had if that person had paid the instrument.

Article 37

The order to pay contained in a bill does not of itself operate as an assignment to the payee of funds made available for payment by the drawer with the drawee.

B. The Drawer

Article 38

  1. The drawer engages that upon dishonour of the bill by non-acceptance or by non-payment, and upon any necessary protest, he will pay the bill to the holder, or to any endorser or any endorser's guarantor who takes up and pays the bill.
  2. The drawer may exclude or limit his own liability for acceptance or for payment by an express stipulation in the bill. Such a stipulation is effective only with respect to the drawer. A stipulation excluding or limiting liability for payment is effective only if another party is or becomes liable on the bill.

C. The Maker

Article 39

  1. The maker engages that he will pay the note in accordance with its terms to the holder, or to any party who takes up and pays the note.
  2. The maker may not exclude or limit his own liability by a stipulation in the note. Any such stipulation is ineffective.

D. The drawee and the acceptor

Article 40

The drawee is not liable on a bill until he accepts it.

The acceptor engages that he will pay the bill in accordance with the terms of his acceptance to the holder, or to any party who takes up and pays the bill.

Article 41

An acceptance must be written on the bill and may be effected:

  1. By the signature alone of the drawee.

An acceptance may be written on the front or on the back of the bill.

Article 42

  1. An incomplete bill which satisfies the requirements set out in paragraph 1 of article 1 may be accepted by the drawee before it has been signed by the drawer, or while otherwise incomplete.
  2. A bill may be accepted before, at or after maturity, or after it has been dishonoured by non-acceptance or by non-payment.
  3. If a bill drawn payable at a fixed period after sight, or a bill which must be presented for acceptance before a specified date, is accepted, the acceptor must indicate the date of his acceptance; failing such indication by the acceptor, the drawer or the holder may insert the date of acceptance.
  4. If a bill drawn payable at a fixed period after sight is dishonoured by non-acceptance and the drawee subsequently accepts it, the holder is entitled to have the acceptance dated as of the date on which the bill was dishonoured.

Article 43

An acceptance must be unqualified. An acceptance is qualified if it is conditional or varies the terms of the bill.

If the drawee stipulates in the bill that his acceptance is subject to qualification:

  1. He is nevertheless bound according to the terms of his qualified acceptance;
  2. The bill is dishonoured by non-acceptance.

An acceptance relating to only a part of the sum payable is a qualified acceptance. If the holder takes such an acceptance, the bill is dishonoured by non-acceptance only as to the remaining part.

An acceptance indicating that payment will be made at a particular address or by a particular agent is not a qualified acceptance, provided that:

  1. The place in which payment is to be made is not changed;
  2. The bill is not drawn payable by another agent.

E. The endorser

Article 44

  1. The endorser engages that upon dishonour of the instrument by non-acceptance or by non-payment, and upon any necessary protest, he will pay the instrument to the holder, or to any subsequent endorser or any endorser's guarantor who takes up and pays the instrument.
  2. An endorser may exclude or limit his own liability by an express stipulation in the instrument. Such a stipulation is effective only with respect to that endorser.

F. The transferor by endorsement or by mere delivery

Article 45

Unless otherwise agreed, a person who transfers an instrument, by endorsement and delivery or by mere delivery, represents to the holder to whom he transfers the instrument that:

  1. The instrument does not bear any forged or unauthorized signature;
  2. The instrument has not been materially altered;
  3. At the time of transfer, he has no knowledge of any fact which would impair the right of the transferee to payment of the instrument against the acceptor of a bill or, in the case of an unaccepted bill, the drawer, or against the maker of a note.

Liability of the transferor under paragraph 1 of this article is incurred only if the transferee took the instrument without knowledge of the matter giving rise to such liability.

If the transferor is liable under paragraph 1 of this article, the transferee may recover, even before maturity, the amount paid by him to the transferor, with interest calculated in accordance with article 70, against return of the instrument.

G. The guarantor

Article 46

  1. Payment of an instrument, whether or not it has been accepted, may be guaranteed, as to the whole or part of its amount, for the account of a party or the drawee. A guarantee may be given by any person, who may or may not already be a party.
  2. A guarantee must be written on the instrument or on a slip affixed thereto ("allonge").
  3. A guarantee is expressed by the words "guaranteed", "aval", "good as aval" or words of similar import, accompanied by the signature of the guarantor. For the purposes of this Convention, the words "prior endorsements guaranteed" or words of similar import do not constitute a guarantee.
  4. A guarantee may be effected by a signature alone on the front of the instrument. A signature alone on the front of the instrument, other than that of the maker, the drawer or the drawee, is a guarantee.
  5. A guarantor may specify the person for whom he has become guarantor. In the absence of such specification, the person for whom he has become guarantor is the acceptor or the drawee in the case of a bill, and the maker in the case of a note.
  6. A guarantor may not raise as a defence to his liability the fact that he signed the instrument before it was signed by the person for whom he is a guarantor, or while the instrument was incomplete.

Article 47

The liability of a guarantor on the instrument is of the same nature as that of the party for whom he has become guarantor.

If the person for whom he has become guarantor is the drawee, the guarantor engages:

  1. To pay the bill at maturity to the holder, or to any party who takes up and pays the bill;
  2. If the bill is payable at a definite time, upon dishonour by non-acceptance and upon any necessary protest, to pay it to the holder, or to any party who takes up and pays the bill.

In respect of defences that are personal to himself, a guarantor may set up:

  1. A guarantor may set up against a holder who is not a protected holder only those defences which the person for whom he has become a guarantor may set up against such holder under paragraphs 1, 3 and 4 of article 28;
  2. A guarantor who expresses his guarantee by the words "guaranteed", "payment guaranteed" or "collection guaranteed", or words of similar import, may set up against a protected holder only those defences which the person for whom he has become a guarantor may set up against a protected holder under paragraph 1 of article 30;
  3. A guarantor who expresses his guarantee by the words "aval" or "good as aval" may set up against a protected holder only:
    • The defence, under paragraph 1 (b) of article 30, that the protected holder obtained the signature on the instrument of the person for whom he has become a guarantor by a fraudulent act;
    • The defence, under article 53 or article 57, that the instrument was not presented for acceptance or for payment;
    • The defence, under article 63, that the instrument was not duly protested for non-acceptance or for non-payment;
    • The defence, under article 84, that a right of action may no longer be exercised against the person for whom he has become guarantor;
  4. A guarantor who is not a bank or other financial institution and who expresses his guarantee by a signature alone may set up against a protected holder only the defences referred to in subparagraph (b) of this paragraph;
  5. A guarantor which is a bank or other financial institution and which expresses its guarantee by a signature alone may set up against a protected holder only the defences referred to in subparagraph (c) of this paragraph.

Article 48

  1. Payment of an instrument by the guarantor in accordance with article 72 discharges the party for whom he became guarantor of his liability on the instrument to the extent of the amount paid.
  2. The guarantor who pays the instrument may recover from the party for whom he has become guarantor and from the parties who are liable on it to that party the amount paid and any interest.

CHAPTER V. PRESENTMENT, DISHONOUR BY NON-ACCEPTANCE OR NON-PAYMENT, AND RECOURSE
Section 1. Presentment for acceptance and dishonour by non-acceptance

Article 49

  1. A bill may be presented for acceptance.
  2. A bill must be presented for acceptance:
  1. If the drawer has stipulated in the bill that it must be presented for acceptance;
  2. If the bill is payable at a fixed period after sight; or
  3. If the bill is payable elsewhere than at the residence or place of business of the drawee, unless it is payable on demand.

Article 50

  1. The drawer may stipulate in the bill that it must not be presented for acceptance before a specified date or before the occurrence of a specified event. Except where a bill must be presented for acceptance under paragraph 2 (b) or (c) of article 49, the drawer may stipulate that it must not be presented for acceptance.
  2. If a bill is presented for acceptance notwithstanding a stipulation permitted under paragraph 1 of this article and acceptance is refused, the bill is not thereby dishonoured.
  3. If the drawee accepts a bill notwithstanding a stipulation that it must not be presented for acceptance, the acceptance is effective.

Article 51

A bill is duly presented for acceptance if it is presented in accordance with the following rules:

  1. The holder must present the bill to the drawee on a business day at a reasonable hour;
  2. Presentment for acceptance may be made to a person or authority other than the drawee if that person or authority is entitled under the applicable law to accept the bill;
  3. If a bill is payable on a fixed date, presentment for acceptance must be made before or on that date;
  4. A bill payable on demand or at a fixed period after sight must be presented for acceptance within one year of its date;
  5. A bill in which the drawer has stated a date or time-limit for presentment for acceptance must be presented on the stated date or within the stated time-limit.

Article 52

A necessary or optional presentment for acceptance is dispensed with if:

  1. The drawee is dead, or no longer has the power freely to deal with his assets by reason of his insolvency, or is a fictitious person, or is a person not having capacity to incur liability on the instrument as an acceptor; or
  2. The drawee is a corporation, partnership, association or other legal entity which has ceased to exist.

A necessary presentment for acceptance is dispensed with if:

  1. A bill is payable on a fixed date, and presentment for acceptance cannot be effected before or on that date due