Aval

A third party guarantee of payment on a bill of exchange ( www.practicallaw.com/9-107-6495) or promissory note ( www.practicallaw.com/5-107-7067) which is not fully recognised under English law but is recognised in countries that are signatories to the Geneva Convention on Bills of Exchange and Promissory Notes. Avals are similar to endorsements in that the guarantee to pay is denoted on the face of (or as an attachment to) the instrument. Unlike acceptances, however, the party which avals the instrument is called upon to make payment only in the event that the original obligor fails to honour its commitment to pay. Avals generally are used in the forfait  ( www.practicallaw.com/1-107-5782) market, which provides financing for medium and long term trade transactions.

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