Commercial Paper Fundamentals: Roles, Maturity, and Endorsement
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Definition of a Bill of Exchange
It is a document whereby a person, called the Drawer, instructs another, called the Drawee, to pay a certain amount of money, at a specific time and place, to a person known as the Payee, Holder, or Beneficiary.
Understanding the Bill Guarantee (Aval)
The guarantee (or aval) is the act of undertaking to pay the bill jointly with the drawer. This ensures that the drawee will pay the amount owed; otherwise, the guarantor is responsible for the payment. The Guarantor is the party providing the surety, and the Guaranteed party is the one whose obligation is secured. The guarantee may be limited or unlimited.
Key Roles in a Bill of Exchange
- Drawer: The person issuing the bill and ordering the drawee to pay.
- Drawee (Librado)