Bill of exchange
Definition
A written, unconditional order by one party (the drawer) to another (the drawee) to pay a certain sum, either immediately (a sight bill) or on a fixed date (a term bill), forpayment of goods and/or services received. The drawee accepts the bill by signing it, thus converting it into a post-dated check and a binding contract.
A bill of exchange is also called a draft but, while all drafts are negotiable instruments, only “to order” bills of exchange can be negotiated. According to the 1930 ConventionProviding A Uniform Law For Bills of Exchange andPromissory Notes held in Geneva (also called Geneva Convention) a bill of exchange contains: (1) The term bill of exchange inserted in the body of the instrument and expressed in the language employed in drawing up the instrument. (2) An unconditional order to pay a determinatesum of money. (3) The name of the person who is to pay (drawee).
(4) A statement of the time of payment. (5) A statement of the place where payment is to be made. (6) The name of the person to whom or to whose order payment is to be made. (7) A statement of the date and of the place where the bill is issued. (8) The signature of the person who issues the bill (drawer).
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A bill of exchange is the most often used form of payment in local andinternational trade, and has a long history- as long as that of writing.
Essential of a Bill of Exchange
1. It should be in written.
2. Unconditional order to pay.
3. Signed by writer.
4. Debtor must be a certain person.
5. Payment must be a certain amount.
6. Payment must be done on maturity of bill.
7. Acceptance must be given by debtor on this bill.
Maturity Date
Due date of bill is also called maturity date and we can get three day of grace period for paying debt through bill.
Endorsement
If drawer signs on the back side of bill for giving the right to other for getting money from debtor, it will be endorsement.
Dishonour of Bill of Exchange
If drawee or debtor does not pay the money of bill of exchange on maturity, then bill will be dishonour. After this, debtor will be responsible to his unpaid dues.
