Dating

Zmenka – a word often used in Slovak media lately, but do you know its meaning? In this article we will explain what a bill of exchange is and what you should know about it when you come into contact with it.

What is a promissory note?

A promissory note is a written promise by the issuer to pay a sum of money on demand or at an agreed time. This legal form of payment instrument is well known and often used in commercial transactions, especially in long-term financing or commodity trading.

The promissory note shall, according to Act No. classified as securities. A promissory note is generally a negotiable instrument that serves as a written representation by one person (the drawer of the note) to another person (the holder of the note) that he or she will pay a sum of money at a future date and place specified in the note. It is a form of written promise to pay.

In the legal sense, bills of exchange in Slovakia are regulated by Act No. 191/1950 Coll., the Bills of Exchange and Cheques Act, which is based on the Geneva Bills of Exchange and Cheques Agreements. This Act distinguishes between foreign and own bills of exchange. It also determines what a bill of exchange must contain to be valid and further defines the rules for its use, enforcement and maturity.

Types of bills of exchange by origin

According to the reason for their occurrence, they are divided into:

• commercial bills of exchange used in payment transactions between businesses
• financial notes – credit or loan notes
• bail bonds – debt recovery

Types of bills of exchange

Promissory note – there are two parties to this note – the drawer of the note (the drawee), who undertakes to pay the owner of the note (the creditor/remitter) a certain amount of money within a specified time period.

Alien promissory note – involves three parties. In this case, the drawer of the note (the drawee) entrusts a third party (the exchanger/assignee) with the payment of a sum of money to the holder of the note (the drawee).

Bianko promissory note – such a note can be issued without specific details e.g. It may not specify the amount or place, but contains a promise by the debtor to the owner to pay the amount. It only comes into force after all the necessary details have been filled in.

What must a promissory note contain to be valid?

Whether the promissory note is promissory or promissory note, both types must include:

• The designation “promissory note” must appear in the text of the note itself and in the language in which the instrument is written.
• An unconditional written order to pay a sum of money. This amount must be stated in an exact figure.
• The name of the person to whom the order is addressed, i.e. the owner of the order.
• The due date on which the note is to be paid.
• Indication of the place where payment is to be made.
• The date and place of issue of the bill of exchange.
• Signature of the person issuing the bill.

In the case of a foreign promissory note, the text must include an indication of who is to pay the amount, i.e. an indication of the third party.

Maturity of the bill of exchange and its payment

The maturity date of a promissory note is the agreed date on which the note becomes payable, which means that the amount on the note must be paid.

• Fixed bills of exchange have a fixed maturity date. They are among the “clearest” because they are specific and the date cannot be manipulated.
• Date bills are payable within a certain period of time from the date of issue. (E.g. “a bill of exchange is payable 15 days after it is issued”)
• Bills of exchange are due upon presentation (sighting). It must be presented for payment within one year of issue. Failure to do so will invalidate it. The issuer of the bill (the drawer) may extend or shorten this period.
• Term notes must be repaid after a certain period of time after presentation.

Fixed, dated and term bills must be presented by the holder of the bill to the drawer for payment on the payment day or on one of the next two business days.

The debtor may request partial payment of the bill and the issue of a partial payment certificate. The holder of the note (the creditor) should not refuse such a method of payment, nor is he obliged to accept payment before maturity. In that case, the payer acts at his own risk and responsibility.

If the creditor fails to produce the bill within the time limit, the debtor may deposit the amount in a court of competent jurisdiction at the owner’s expense.

Advantages and uses of bills of exchange?

1. Payment instrument: allows the holder of a promissory note to demand payment from the debtor.
2. Payment guarantee: provides the holder with an assurance that he or she will receive money in the future for goods or services provided, as its issuance creates a written obligation for the debtor to pay it.
3. Commercial flexibility: allows the parties to agree different payment terms.
4. Transferability: the holder of a promissory note may transfer his/her promissory note rights to another person by endorsement, thereby making him/her another promissory note creditor.
   

What are the risks of a promissory note?

• Default risk: the main risk of a promissory note is that the drawer may not be able or willing to repay the debt. If this happens, the creditor may take legal action to recover the debt.
• Risk of forgery: as with any document, there is a risk that a promissory note can be forged. It is therefore important to verify the authenticity of a bill of exchange before accepting it.

The most famous promissory note case in Slovakia

Marian Kočner is a Slovak businessman who has become the centre of many controversies and criminal investigations. One of them is the so-called “promissory note case“. According to available published information from the media, its essence is the accusation of Marian Kočner and his associates of forging promissory notes that were supposed to serve as security for a debt to the television channel Markíza. The total value of the forged promissory notes was supposed to amount to tens of millions of euros.

The case began to unfold when Kočner presented in court promissory notes that he said secured a debt of EUR 70 million owed to the television station Markíza. The latter, however, claimed that these promissory notes were forgeries and did not correspond to the real agreement between the parties. A judicial inquiry was subsequently opened to determine whether the promissory notes were forgeries and whether there was a genuine debt which they were supposed to secure.

Marian Kočner and his associates have been charged with forgery, fraud and other offences in connection with this matter. The case has received a lot of publicity and is the subject of intense debate, as it also touches on issues of transparency and the integrity of the Slovak judicial system.

Kočner was sentenced to 19 years in prison in the case. The Supreme Court upheld the decision of the Specialised Criminal Court, which sentenced Kočner to 19 years. Also definitely guilty is the former director of the television station Markíza and ex-minister Pavol Rusko.

Frequently asked questions about promissory notes

Bills of exchange are complex financial instruments, so it is understandable that they can raise many questions. Here are some of the most common questions people may have about bills of exchange:

What is a promissory note?

A promissory note is a written document in which the drawer agrees to pay a certain amount of money to another party (the creditor) on demand or at a specified time.

What is the difference between a bill of exchange and a cheque?

The main difference is that a promissory note is a promise to pay a certain amount of money, while a cheque is an instruction from the bank to pay a certain amount of money. Thus, a bill of exchange requires the drawer to have sufficient funds to pay it when the bill needs to be paid, while a cheque requires the drawer to have sufficient funds in his bank account.

How does a promissory note work?

A promissory note works by the issuer creating a document that commits to pay the other party a certain amount of money at a certain time. That party can then present the note for collection or transfer it to another person.

What are the legal consequences of non-payment of a promissory note?

If the note is not paid, the creditor can take legal action to recover the debt. This may include taking legal action in court or using other means to recover the debt, such as foreclosure.

Can a promissory note be transferred to another person?

Yes, promissory notes are often transferable, which means that the holder can sell or transfer them to another person. This process is called “endorsement” and allows bills of exchange to serve as a form of negotiable debt.

How is the authenticity of a promissory note verified?

Authentication of a bill of exchange may include checking the signature of the drawer, verifying the particulars on the bill and comparing those particulars with those in the creditor’s records. In some cases, it may also be necessary to verify the authenticity of the bill of exchange through a bank or other financial institution.

In conclusion

Currency exchange brings with it many benefits. They are a useful tool for business transactions, providing flexibility and certainty. At the same time, it should be borne in mind that there are also certain risks associated with their use, such as non-refund, counterfeiting and legal complications. To avoid these, it is a good idea to familiarise yourself with all the legal information and procedures before you start using them.