Bill of Exchange Law
24. Recourse
All drawers, acceptors, endorsers or avals of a bill of exchange are jointly and severally liable to the holder. The holder has the right of proceeding against all these persons individually or against some of them or collectively without being required to observe the order in which the have become bound.
a) Persons involved in recourse relating to bills of exchange
The persons against whom recourse is taken are referred to as parties under recourse. The other person is a party taking recourse.
The first person among the debtors is the drawer. He is liable for payment and acceptance of the bill pursuant to Article I, Section 9, BECA. Recourse against him will be taken by the possessor if the bill is not accepted or - which is more usual in practice - if the bill was paid for by the direct debtor. As mentioned above, the drawer could exclude his liability for acceptance (but not his liability for payment - a possible clause of this meaning would be considered as having never been written, comp. Article I, Section 9, Paragraph 2, BECA).
The typical party under recourse is the endorser who is liable for acceptance of and payment for the bill with the exception of a special type of endorsement (see above the section about various types of endorsement, especially the exonerating and the direct endorsements and the sub-endorsement). Parties under recourse may also be the givers of aval for these persons and the acceptors in honour.
Although direct debtors are not parties under recourse the content of claims against them practically does not differ. Within recourse all debtors are treated equally regardless of whether they are direct or indirect ones.
Table: Types of Recourse Relating to Bills of Exchange
The content of rights of recourse depends on whether recourse is taken by the possessor of the bill or by the debtor involved in recourse who has already paid for the bill and now he is taking recourse against his predecessors. The former is referred to as recourse in the first degree, the latter as recourse relating to reimbursement.
It follows from Article I, Section 48, Paragraph 1, BECA, that the possessor may, within the first recourse, demand from any liable debtor:
- the bill sum of money (with possible interest)
- six per cent interest since the day of maturity
- expenses (especially the expenses on protest and
notification)
- provision
The bill sum of money is the sum stated in the bill of exchange (its nominal value). An interest stated in the text of the bill may be added to that pursuant to the provision mentioned above (but only with bills at sight or time bills at sight). If the bill has been partially paid, then the sum which can be demanded by the possessor within recourse is automatically decreased.
With recourse before maturity (i.e. recourse for non-acceptance or endangering) it is necessary to deduce the interest for the interim period from the bill sum of money. This is calculated according to the discount rate of the Czech National Bank valid on the day of recourse in the domicile of the possessor.
The possessor is further entitled to demand a six per cent interest since the day of maturity. This interest must be strictly distinguished from the interest on bills at sight and time bills at sight according to the previous paragraph. The interest running starts on the day of maturity and runs until the day of payment for the bill by the debtor under recourse. From this it is apparent that within possible recourse this interest cannot be demanded before maturity.
The other rights of the possessor are connected especially with reimbursement of expenses on protest and notification. However, the law does not exclude reimbursement of other expenses which the possessor may suffer (but it does not include legal costs the reimbursement of which may be claimed pursuant to procedure regulations). If the possessor protested non-acceptance or non-payment even if he was relieved from that duty by a clause in the bill (for example, in the wording "without protest"), the expenses on the protest do not become part of rights relating to recourse. As useless, these expenses are borne by the possessor himself.
The last right of the possessor within the first recourse is his right to demand payment of provision (bill provision). It is a special form of financial satisfaction which is a compensation for the possessor's expenses and suffering linked with recourse (loss of time and energy).
Pursuant to Article I, Section 48, Paragraph 1, Point 4, BECA, the provision is 1/3 per cent of the bill sum of money. The cited provision allows for the rate to be decreased by a clause in the bill. The right to provision also arises in situations when the possessor has protested the bill in spite of being relieved from that duty by the drawer's clause. As the expenses according to paragraph 3, the provision is a lump sum of cash without interest; within the first recourse the six per cent interest cannot be paid on it.
The party taking recourse must hand over the bill with a protest and a certificate about payment - the so-called restituting receipt - to the party under recourse. It is improper to attach an acquaintance on payment as it is in the case of the direct payment for the bill (comp. Article I, Section 39, Paragraph 1, BECA), because if it is not quite clear from the certificate that it only concerns the payment by a concrete debtor under recourse, one may rightly conclude that the bill was paid for by the direct debtor (and that all bill rights have extinguished).
The person who paid for the bill in the first recourse acquires the right to take his own recourse (recourse in the second degree). Here, the party taking recourse is the previous person against whom recourse was taken. This procedure may repeat in more degrees (according to the number of debtors in the bill). Just as the possessor, the new party taking recourse - and, of course, the parties taking recourse in other degrees - is not bound by the order of his predecessors.
For reimbursement there is a relatively short six-month time of limitation.
The content of rights relating to recourse follows from Article I, Section 49, BECA. A party who takes up and pays a bill of exchange can recover from the parties liable to him: 1. The entire sum which he has paid; 2. Interests on the said sum calculated at the rate of 6 per cent, starting from the day when he made payment; 3. Any expenses which he has incurred; 4. provision, which is to be calculated according to Section 48 par. 1 and 4.