Bills of Exchange

Banking & Practice

Definition of a bill of exchange as according to section 3(1) of the Bills of Exchange Act 1949?

An unconditional order in writing requiring the drawee to pay a sum certain in money to a specified person or bearer, on demand or at a fixed/determinable future time.

three main parties involved in a bill of exchange

Drawer, drawee, and payee

“unconditional” in a bill of exchange means?

There must be no condition to the bill

Why does a conditional order invalidate a bill of exchange?

Because a valid BOE must contain an unconditional order to pay; conditions violate S.3 requirements.

requirement for a bill of exchange to be considered “in writing” ?

must be written or printed in any visible form, including handwriting, typewriting, lithography,

Why is the drawer’s signature essential on a bill of exchange?

no one is liable as drawer, indorser, or acceptor unless they have signed.

a bill is payable “on demand” when…

When it is stated to be payable on demand/sight/presentation, or when no time for payment is specified

“sum certain in money” mean…

The amount payable must be fixed or determinable from the bill itself

blank indorsement is…

An indorsement where the indorser signs without naming an indorsee, making the bill payable to bearer

special indorsement is…

An indorsement that specifies the person to whom or to whose order the bill is payable

“dishonour by non-acceptance” mean..

hen the drawee refuses to accept/sign the bill when it is duly presented for acceptance

dishonour by non-payment” mean..

When a bill is duly presented for payment, but the drawee refuses or fails to pay the amount due

consequence of failing to present a bill for payment

The drawee and all indorsers are discharged from liability

a bill be presented for acceptance when..

When it is payable after sight, expressly requires presentment, or is payable elsewhere than the drawee’s place of business

notice of dishonour is to…

To hold the drawer and indorsers liable after the bill is dishonoured