Understanding Payment Methods and Financial Instruments

Types of Payment

• Advance Payment: The provider requires payment prior to collection or delivery of services.
• Cash Payment: The customer pays at the time of delivery or service provision.
• Postponed Payment / Credit: The provider allows postponing bill payment for a period.

Payment Delays and Associated Documents

If there is a delay in payment, the buyer will be required to pay legal interest on the outstanding amount. Both cash and other forms of payment for various goods or services involve a series of documents:

A) The Check

Definition and Requirements

A check is a document regulated by law. The requirements are:

• Name of the document (e.g., "Check")
• Mandate to pay a specific sum
• Name of the drawee (the bank that has to pay)
• Place of payment, date, and place of issue
• Signature of the issuer (drawer)

Checkbooks are provided by credit institutions.

Persons Involved in a Check

• Drawer: The person issuing the check and ordering the drawee (their bank) to pay.
• Drawee: The bank where the drawer has a checking account and that must pay the check upon presentation.
• Payee / Bearer: A person who receives the check from the drawer and presents it to the drawee for payment.

Other Intervening Parties in a Check

• Guarantor / Avalist: A person who guarantees payment of the check; otherwise, they will pay it.
• Endorser: A person who owns the check and transfers it to another by endorsement.

B) Classes / Types of Checks

• Bearer Check: Carries the note "bearer" and is paid to any person presenting it or deposited into an account.
• Named Check: Issued in favor of a specific person or entity. It can only be cashed by that person or deposited into their account, upon presentation of ID and signature.
• To Order Check: Checks issued in the name of a person or entity, allowing for endorsement.
• Not to Order Check: The payee is a specific person, and the check includes the clause "not to order" or "non-transferable," preventing endorsement.

C) The Guarantee (Aval)

The payment of a check can be guaranteed by an aval, either for the whole or part of the amount. The guarantor can be anyone except the drawee bank. The aval is made on the reverse of the check and expressed by the term "AVAL," signed by the guarantor, who must explicitly state they are providing an aval; otherwise, it will be construed as an endorsement by the drawer.