The bill of exchange under the Bulgarian Commerce Act
A bill of exchange is a unilateral transaction and the parties thereto are the issuer and the payer. It is effectively a payment order, but unilateral transactions may not impose obligations on persons other than the issuer of the unilateral transaction. Therefore, seen as a unilateral transaction, it is a payment empowerment, and the payment obligation on the payer arises based on a different legal relationship. Bills of exchange have 3 persons - issuer, payer, underwriter. Parties to the very payment order are the issuer and the payer. The legal relationship under a bill of exchange exists based on another causal relationship, therefore payment is due. It is believed that the parties to this relationship must be sui juris persons, but there is no explicit legal provision to that effect. The parties need not necessarily be traders. The issuer and the payer may be the same person. The bill of exchange, except being a formal transaction, contains certain attributes: it should be named a bill of exchange, the order must be for a sum of money and be unconditional, it should indicate who the payer is, the date of payment - this can be determined in 4 ways - upon presentation, certain period after the presentation, certain period after its issuance, on a specific day, place of payment, indicate the underwriter, date and place of issue of the bill of exchange, as well as the issuer's signature. The issuance of the bill of exchange is connected with its first assignment. Moreover, the issuer is bound by signing to pay the amount in the bill of exchange together with other accessory obligations under Art. 506 (1) CA. If there was an order to issue the bill of exchange, the issuer is always liable to pay for it. The acceptance of the bill of exchange pursuant to Art. 475-482 CA is necessary in order to oblige the payer to make payment on it. Acceptance of the bill of exchange is a unilateral legal transaction, under which the payer undertakes the obligation referred to in the document. They can pay even without accepting, but an obligation to pay arises at the very acceptance. The payer, in turn, cannot accept a bill of exchange, if it has not been presented for acceptance. If the payer refuses to accept the bill of exchange, which is established by a specific procedure, the issuer remains the only direct debtor on the bill of exchange. The bearer generally has a right and not an obligation to present it for acceptance. However, there are situations in which the bearer must file a bill of exchange for acceptance: if so agreed between the parties or if the maturity of the bill of exchange is a fixed period after presenting it. The law does not explicitly state so, but in practice it is assumed that any person may present a bill of exchange for acceptance.
There are two ways to transfer the bill of exchange - civil and commercial. The transfer of the rights incorporated in the bill of exchange may be done both through universal legal succession - death of individuals/termination of legal entities and by private legal succession - by testament. Transfer by private succession can, in turn, be done in several ways - by transmission, subrogation or assignment.
The main commercial method of transferring the bill of exchange is endorsement. Under this unilateral legal transaction the creditor - endorser is replaced by a new creditor - endorsee, the latter acquires rights as they are objectified in the bill of exchange. This is namely the difference between the transfer of a bill of exchange by endorsement and by assignment, since in the case of assignment, the assignor transfers only the rights they have, not rights listed in the bill of exchange.
The payer makes the payment after the bill of exchange is presented. The law provides for 2 types of presentation of the bill of exchange:
- presentation of the bill of exchange for acceptance - can be presented for acceptance by its legitimate bearer and the holder of the bill of exchange. The presentation for acceptance is carried out by place of residence of the payer, even when the place of payment is different. If a bill of exchange does not specify a time limit for presentation, it can be presented for acceptance by the maturity date in the event that the maturity date is on a particular day.
- presentation for payment - since bill of exchange liabilities and receivables are considered searchable, the legislator provided for the presentation of a bill of exchange for payment. The presentation for payment should be made to the payer, such that this presentation for payment should be made on the maturity date or on one of the two subsequent working days. Presenting the bill of exchange for payment shall be considered as an invitation to voluntary performance.
If the bill of exchange is not presented for payment, the following adverse legal consequences follow for the holder of the bill of exchange:
- The debtor is not in default, no corresponding default interest exists
- If the holder does not present the bill of exchange for payment or does not establish the non-payment by way of protest, they lose regressive rights against obligated persons under the bills of exchange, such regressive rights are lost if the bill of exchange does not include a clause that exempts them from carrying out a protest. This clause is included by inserting phrases like "sans protest" and "sans frais".
The bill of exchange must be paid to its legitimate bearer. Payment executed by the debtor does not result in repayment of all obligations under the bill of exchange. Such a result would only exist where payment is made by the direct debtor - the payer. The payment made by the respective releases that person from liability, but also leads to the emergence of regressive rights against previous liable persons.
Failure to pay or accept the bill of exchange must be established by the so-called protest. The bill of exchange protest proceedings are contentious proceedings, carried out by a notary or an assistant notary. Deadline for protest - the maturity date, respectively, the following 2 working days.
The performance of the protest is a prerequisite condition for the realisation of recourse rights under the bill of exchange. If no protest is carried out, or where it is done outside the legal deadline, those recourse rights are prejudiced - under this scenario the legitimate bearer of a bill of exchange can only exercise his rights under the rules of unjust enrichment. The bill of exchange creditor may be released from the obligation to carry out the protest, if the bill of exchange itself contains the clause "sans protest, sans frais." Such a clause may be written by the issuer, any of the endorsers or the guarantor.
According to Art. 531 CA, claims under the bill of exchange against the payer shall expire by limitation after three years following maturity. Proceedings against the endorsers and against the issuer shall expire by limitation one year from the date of a duly made protest or from maturity provided the bill of exchange contains the provision "sans frais". Claims between endorsers and against the issuer shall expire by limitation six months from the date on which the endorser paid the bill of exchange or from the date on which an action was brought against him.