NON-CONVENTIONAL TYPES OF BILLS UNDER THE LEGISLATION OF THE RUSSIAN FEDERATION

The operative Regulation on a bill of exchange and a promissory note¹, as it is known, makes a distinction between two types of bills: a promissory note and a bill of exchange, first of the said contains an unconditional promise of the giver of bill, and the second - a pure proposal of the giver of bill to the third party - the payer to pay to the billholder or to pay a specified sum of money on demand at a fixed future date. Concurrently, with reference to the payer, a bill of exchange contains a conditional promise of the giver of bill to settle the bill, should it be not accepted or honored by the payer². From the moment of acceptance, a bill of exchange certifies the obligations of two parties: the maker and the acceptor. Though, in the course of circulation, said distinction between a bill of exchange and a promissory note disappears to a great extent when the signatures of endorsers appear, who became in the same way as the maker of a promissory note, conditionally obliged to the bill holder. Pursuant to Article 77 of the Regulation on a Bill of Exchange and a Promissory Note, the norms governing a promissory note shall be applicable to a bill of exchange as they are compatible with its nature.

In addition to the said two "conventional" types of bills, the Regulation on a Bill of Exchange and a Promissory Note also allows drawing combined bills (bills issued to oneself) and bills to own order, which are not in a strict sense of the word separate types of bills, and which represent the variant of a bill of exchange and the same legal rules shall be applicable to them as to ordinary bills of exchange. The basis for such specification of combined bills and bills to own order is the concurrence of several participants of the legal relation pertaining to bills in one person.

The drawee and drawer become one and the same person in the combined bill. In other words, the maker appoints himself the payer under the said bill. The option to issue combined bills is directly provided for under article 3 of the Regulation of a Bill of Exchange and a Promissory Note, and for instance, in the context of commercial banks it is additionally confirmed by the letter of the Central Bank of RF dated 23.02.95 No26 "On Transactions of Commercial Banks with Bills", where it is stated in article 2 that "when issuing an own bill the commercial bank may act concurrently as the maker and the acceptor of one and the same bill of exchange". Despite possessing certain similar features with a promissory note, this type of a bill as it has already been noted, is not a promissory note. On the contrary, under the Single Law on a Bill of Exchange and a Promissory Note (SL)³, the British Law on Bills of Exchange dated August 18, 1882 allows the bill holder to view such a bill at his own discretion as a promissory note or as a bill of exchange. Pursuant to the SL and Regulations, this bill is the bill of exchange and as it has already been stated the norms governing bills of exchange shall be applicable. G.F. Shershenivich has quite an opposite point of view. He believes that the drawer who appointed himself as the drawee, "bears the same obligation as the maker of a promissory note. The acceptance is unnecessary"⁴.

And in actual fact, the maker of a combined bill undertakes an obligation under this bill at the moment of its issuance but as the maker of the bill of exchange, and just as the maker, and not as the acceptor⁵. Nevertheless, though a combined bill, until it is accepted by the maker, comprises the obligation of the same to pay the sum, violation of the acceptance rules which are unable to exclude the maker's liability, may still entail, for instance, if there is recourse to debtors under such a bill and their exclusion from the recourse liability.

Another variant of a bill of exchange is the bill to own order where the drawer and the payee make one and the same person. The maker appoints himself the payee. Additionally, the maker may make settlements with any of his creditors by endorsing the bill. Thus, the bill to own order may be convenient for the maker when he does not know exactly whom he is going to pay, but concurrently there is a necessity to draw a bill on his debtor. Also, the bill to own order allows settling the issue associated with the impossibility for the debtor to issue a separate promissory note. In such instance, said debtor accepts a bill of exchange in favor of the maker who as a result of such operation actually has a promissory note of the debtor (acceptor).

In addition to combined bills and bills to own order, V.A. Belov also points out that there is the option of issuing bills to order of the payer and bills to one's own order⁶, which are not directly provided for under the Regulation of a Bill of Exchange and a Promissory Note, but which are in line with the same. The drawee and the payee make one and the same person under the bill to the payer's order. The application of such a bill is efficient in the same instances as the application of the bill to own order, where the only difference is that the person to whom obligation is issued under the bill made to the payer's order, shall be chosen not by the maker, but by the payer (the first purchaser of the bill).

The bill to one's own order is the bill with only one participant, where legal relations may arise only upon endorsement of such a bill to a third party. The endorsement in blank of such a bill entails the appearance of the bill with blank endorsement containing the obligation of only one person. But the same result may be achieved when making blank endorsement of a non-accepted bill to own order. However, the acceptance of the bill with the only participant, unlike the acceptance of the bill to own order does not increase the number of the persons obliged under the bill. In addition, unlike the bill to own order, the bill with one participant does not require at all the reference to any other persons except the maker who is the drawee and the payee in one person.

But one should admit that the option of existence of bills of exchange to the payer's order and bills of exchange to one's own order is quite disputable. Accordingly, to avoid an unfavorable effect which may arise from the acknowledgment of said variants of the bill as issued in violation of the requirements set forth by legislation, it is hardly possible to acknowledge efficient use of said instruments in practice.

¹ Approved by the Regulation of the Central Executive Committee and Council of People's Commissars of August 7, 1937 N^o 104/1341. Collection of Laws and Decrees of the Workers and Peasants' Government of the U.S.S.R. 1937 N^o 52 article 221.
² Different opinion was advanced by V.A. Belov stating that "a bill of exchange does not comprise the obligation of the billholder, a fortiori conditional." As to the contents of an unaccepted bill of exchange, V.A. Belov points out the proposal to the drawee and the obligation of the drawer to make every effort to issue the acceptance. The drawer's liability, in V.A. Belov's opinion, should the bill not be accepted by the payer, is based on mala fides of the drawer, which was expressed as consent to issue an offer in the form of a bill of exchange, which is subject to specific legal effect, without having a possibility to secure its acceptance by the payer. V.A. Belov Bill Russia's Laws on Bills M., 1996. Pages 53 ,236, 237.
³ Supplement No1 to the Geneva Convention No 358 dated June 7, 1930.
⁴ G.F. Shershenevich. Trade Law Book (Edition of 1914) M.: Spark, 1994. Page 279.
⁵ Different opinion was advanced by V.A. Belov who points out that the maker of a combined bill does not assume the obligation until such bill is accepted. V.A. Belov The same book. Page 98.
⁶ V.A. Belov, the Same Book. Page 99.; V.A. Belov "Definition, Essence and Drawing of Bills: Some Practical Issues." The journal "Business and Law" 1997 N^o 5, Page 61.