Forfaiting Law and Legal Definition

Forfaiting is the purchase of an exporter's receivables, the amounts owed by importers to whom goods have already been delivered, at a discount by a specialized financing firm or a department of a bank.

It is the practice of taking promissory notes or other obligations without recourse, usually in connection with the importation of goods. A foreign buyer may cause its bank to avalize its notes, so that the seller of goods or services to whom the buyer gives the notes can forfait them with a domestic bank. The domestic bank will take the notes from the buyer without recourse because the notes are subject to the foreign bank's aval. [Holifield v. BancorpSouth, Inc., 891 So. 2d 241, 242-243

(Miss. Ct. App. 2004)].