Understanding Exchange Acts: Draft, Acceptance, Endorsement, and Aval

Exchange Acts: Key Concepts and Operations

It is the act of creating the security.
Characters: Drawer, Taker, and Drawee.
“Drawee” exists only in money orders, such as bills of exchange, checks, and duplicates.

Concept: The act by which the drawee agrees to comply with the payment order given by the drawer.
It is an act in existing “orders” like bills of exchange, checks, and duplicates.
There is no acceptance if the title is due at sight.
There is the “promise to pay” in a promissory note.
It is a free act; the drawee is not obliged to accept the order.
Legally, the drawee may refuse the order; it is a lawful act.
Economically, there may be repercussions in trade relations between the drawer and drawee, but that does not make refusing an illegal act.
Early maturity generates the refusal against the drawer.
Refusal may be total or partial.
Acceptance limiting: Agreeing to pay a portion of the value.
Acceptance amendment: Agreeing to pay the value, but under different conditions (e.g., within a larger period, different location, with lower interest).
Before acceptance: The drawer is the primary obligor.
After acceptance: The drawee is the primary obligor.
Having accepted, the creditor must first collect from the drawee; only upon refusal is he entitled to collect from the other obligors.
Place to express acceptance:
- a) Front of the title: a simple signature is sufficient.
- b) Back: accompanied by the signature, the phrase “accepted” (or equivalent) must be included.

Concept: The act which operates the transmission of the security.
A legal transaction similar to the credit assignment in civil law.
Partial endorsement is null.
Conditional endorsement is valid, but the inserted condition is ineffective; it is considered that there was simply an endorsement without conditions.
Occurs in nominative order.
Bearer bonds require mere tradition.
Nominative not to order requires civil assignment of credit.
Characters: Endorser and Endorsee.
Basic difference between Endorsement and Assignment of Credit:
- Autonomy and abstraction.
- Assignment of credit, as a rule, is “pro soluto” but not “pro solvendo.”
- Endorsements are “pro soluto” and also “pro solvendo.”
Beware of exceptions to personal effects in good faith.
Acts of “endorsement” that are actually transferred (civil) credit:
- a) “Endorsement” in order not to the nominative.
- b) “Endorsement” after protest for non-payment (posthumous endorsement).
Place to express endorsement:
- a) On the back, simply by the signature of the endorser.
- b) In front (obverse), with a signature and the statement “by endorsement” (or equivalent).
Types of Endorsements: Blank and In Black.
- a) Blank: Does not indicate the endorsee.
- b) In Black: Indicates the endorsee.
Improper endorsement: Transfers possession of the instrument but without transferring the right to claim it as represented.
- Endorsement-term.
- Endorsement bond.

Concept: The act of exchange guarantee.
A legal transaction similar to the bail in civil law.
Characters: Aval (Guarantor) and Avalized (Endorsed).
Advance approval:
- Given to the drawee before acceptance.
- Even if the drawee does not accept, the guarantor is still liable.
- In this case, the charge on appeal is in accordance with civil law (not exchange) due to the principle of literalness.
Aval and Blank in Black:
- Blank: Without giving the avalized; it is assumed to be the drawee.
- In Black: Indicates the avalized.
Place to express aval:
- a) On the front (obverse): a simple signature.
- b) On the back: the signature represents the expression “by aval” (or equivalent).
Basic difference between aval and bail:
- A guarantor is not jointly and severally liable (by law, he is not sympathetic; he could do so by contract, which is common in day-to-day). A co-signer is jointly and severally liable (by law).
- Consequently, the guarantor has the benefit of the order, while the co-signer does not.