"An instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument"
The bill is always drawn by a creditor on the debtor. The person who draws the bill is called the Drawer, the person on whom the bill is drawn is called Drawee and the person to whom the amount is payable is called payee.
here is the specimen of a Bill of Exchange
Characteristics of a Bill of Exchange :
The essential characteristics of bill of exchange are almost similar to that of a promissory note. The following are the essentials of a Bill of Exchange.
- It must be in Writing : Like in a promissory note, a bill of exchange must also be in writing.
- It must contain an Order to pay : If the language of the draft does not show any order to pay, the draft will not be considered as a bill of exchange.
- Unconditional Order : The order must be unconditional.
- Signature and Acceptance : It must be signed by the drawer and accepted by drawee.
- Order to Pay Money : It must contain an order to pay money only. The sum payable must be written clearly and unambiguously.
- Indication of the Parties : In case of a Bill of Exchange, the drawer, the drawee (and acceptor when he accepts the bill) and the payee must be indicated with reasonable certainty. Generally the drawer and the payee are the same persons.
- Other Formalities : The formalities relating to number, date, place and consideration, though usually found in bills are not essential. The bill may be made payable on demand.
That's all for now friends. In our next lesson we shall discuss about the differences between the Bill of Exchange and Promissory Notes. Happy reading :)