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Simplifying debt
Written by: Halka Jaklová
Photo by: René Jakl

Do you need to ensure the repayment of a debt as quickly as possible and without complicated documentation? You can choose from among the many types of securities, such as a bill of exchange.

The bill of exchange was used back in medieval times as one of the earliest securities. It is governed by Law No. 191/1950 Coll., on bills of exchange and checks, and is based on an unconditional and indisputable financial commitment to pay a certain sum in a certain place and at a certain time. It is a so-called abstract commitment, which means that with its extinction (e.g., when it is destroyed or lost) the commitment it entails also ceases to exist. Also, the reason the bill was issued is of no importance, as is whether or not the indebted party actually owes the entitled party anything. Its validity is contingent upon its being in the form of a written statement containing precisely stipulated prerequisites. A bill of exchange can be written on any object or piece of paper, but it is best to buy the proper form.
When you buy a bill of exchange you have to know whether you need a so-called "made bill" or a "promissory bill". A promissory bill is a written promise by the indebted party (the issuer) to pay, on a precisely stipulated day, a certain sum to a certain person designated on the bill of exchange. On the other hand, a made bill is a payment order by the creditor (the issuer) to the debtor (the drawee) to pay, on a precisely stipulated day and in an agreed location, an agreed sum to the entitled party. In daily life you will most frequently see made bills. This sort of bill of exchange also requires, in addition to the basic prerequisites, the unconditional acceptance of the party that is to pay. A guarantee of the debtor's commitment by another party or a bank (so-called co-signer) is executed as a clause in the bill of exchange.
The greatest advantage of a bill of exchange is that there is no need to explain or go into how it arose. For the creditor it represents a certain surety, and it is, in and of itself, the legal basis for shortening court proceedings in the event that the debtor fails to pay. It can also be simply sold or transferred to another person. However, the unconditional necessity of precisely and fully stating all of the bill of exchange's essential prerequisites - wherein any possible error results in its invalidity - means you must pay the utmost attention to this security's content and form.

This article was prepared in cooperation with the law offices of JUDr. Jan Dvořáček.

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