1. Meaning of Bill of Exchange

Chapter- 8

Bill of Exchange

Meaning of Bill of Exchange
A bill of exchange is generally drawn by the creditor upon his debtor. It has to be accepted by the drawee (debtor) or someone on his behalf. It is just a dnaft till its acceptance is made. The amount mentioned in the bill of exchange is payable either on demand or on the expiry of a fixed period of time. It must be stamped as per the requirement of law.

The following features of a bill of exchange emerge out of this definition.

• A bill of exchange must be in writing.
• It is an order to make payment.
• The order to make payment is unconditional.
• The maker of the bill of exchange must sign it.
• The payment to be made must be certain.
• The date on which payment is made must also be certain.
• The bill of exchange must be payable to a certain person.

 Bill of Exchange

Parties to a Bill of Exchange

There are three parties to a bill of exchange:

1. A seller/creditor who is entitled to receive money from the debtor can draw a bill of exchange upon the buyer/debtor. The drawer after writing the bill of exchange has to sign it as maker of the bill of exchange.
2. Drawee is the  purchaser or debtor of the goods upon whom the bill of exchange is drawn.
3. Payee is the person to whom the payment is to be made. The drawer of the bill himself will be the payee if he keeps the bill with him till the date of its payment.

The payee may change in case, the drawer has got the bill discounted, the person who has discounted the bill will become the payee or if the bill is endorsed in favour of a creditor of the drawer, the creditor will become the payee. Normally, the drawer and the payee is the same person. Similarly, the drawee and the acceptor is normally the person.