An aval is a guarantee added to a bill of exchange or promissory note by which an avalizing party, commonly a bank, undertakes payment for an obligated party. The aval strengthens the instrument by adding the guarantor’s independent payment support, subject to applicable law and wording.
How is Aval used?
The aval is placed on, or otherwise tied to, a negotiable instrument and identifies the obligation being guaranteed. If the supported party does not pay at maturity, the holder may claim against the avalizing party subject to the instrument and governing law. Buyers of the instrument therefore assess both the underlying obligor and the aval provider.
What records support Aval?
Keep the original instrument, aval wording, avalizing party, capacity, amount, maturity, signatures and any transfer record.
What does Aval not establish?
An informal comfort statement is not necessarily an aval. Formal validity and authority must be confirmed in the relevant jurisdiction.
