These characteristics define the nature of suretyship as either simple or joint and several, giving rise to what are known as the benefit of excussion and the benefit of division. Under the benefit of excussion, a simple guarantor may require the creditor to first pursue the principal debtor, exhausting all legal remedies and proving insolvency before claiming payment from the guarantor. Under the benefit of division, the guarantor may oppose being required to pay the entire debt, demanding that it be divided among all co-guarantors.
An express waiver of both benefits transforms the suretyship into joint and several liability, meaning the guarantor assumes a position similar to that of the principal debtor in relation to the creditor. In commercial matters, particularly in banking, guarantors are typically jointly and severally liable and cannot invoke these benefits unless expressly agreed otherwise. In practice, banking contracts almost always establish joint and several suretyship.
Although suretyship is generally a gratuitous contract, the guarantor may receive compensation from the debtor if agreed. In many cases, the guarantor is designated as “principal payer,” effectively becoming a joint debtor. A monetary suretyship also covers interest generated by the debt, even if not explicitly stated. The obligation is extinguished when the principal debt is paid or when general causes for extinguishing obligations apply.
Aval
In banking operations, the aval is a widely used form of guarantee. Although it resembles suretyship, it differs in structure: the aval creates an autonomous and independent obligation linked to a negotiable instrument, rather than to the underlying debt itself.
Traditionally defined in Argentine commercial law as a written commitment by a third party to guarantee payment of a bill of exchange at maturity, the aval operates independently of the original obligation. It can guarantee the signature of the issuer of a negotiable instrument, even if the instrument has been transferred through endorsements. It may be granted by a third party or by any signatory to the instrument, for an amount equal to or less than the guaranteed obligation.
Differences between suretyship and aval
In suretyship, there is a single obligation with two liable parties, while in the aval there are two autonomous obligations and two debtors. The guarantor in a suretyship may be released if the principal obligation is extinguished for reasons personal to the debtor, whereas the avalist remains bound under similar circumstances. In suretyship, certain defenses of the debtor may be invoked by the guarantor, but this is not generally possible in the aval. The guarantor remains obligated as long as the principal obligation exists, while the avalist is released only if the negotiable instrument is invalid due to the absence of an essential requirement. Additionally, suretyship may be civil or commercial, whereas the aval is inherently commercial due to its connection with negotiable instruments.
Practical use of the aval
The aval is commonly used to guarantee commercial instruments such as promissory notes or bills of exchange. It is typically expressed through a signature on the document, accompanied by wording such as “for aval.” It may also be issued separately from the main instrument, a practice frequently used in banking operations involving credit lines with defined limits and durations.
Another frequent use arises in loan agreements, particularly where companies with limited liability require additional guarantees from shareholders or directors. In strict legal terms, such arrangements often resemble suretyship rather than a true aval.
The aval does not grant preferential rights over other creditors; it simply extends the creditor’s ability to claim payment from additional parties. In many cases, banks act as beneficiaries of avals, securing their credit operations. However, banks may also act as guarantors themselves, issuing avals on behalf of clients, which constitutes a specific form of financing within the financial system.