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What is a Bill of Exchange?

A bank check is a common example of a bill of exchange.
A bank draft, which can be used to establish a bill of exchange.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 28 July 2014
  • Copyright Protected:
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    Conjecture Corporation
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Bills of exchange are financial documents that require the individual or business that is addressed in the document to pay a specified amount of money on a date that is cited within the text. Considered to be a negotiable instrument, the date for the demand to pay generally ranges from the current date to a date within the next six calendar months. This type of document will also require the authorized signature of the debtor in order to be considered legal and binding.

As an unconditional order to pay a fixed sum of money to a creditor, the bill of exchange can take on many different forms. One of the most common examples is the common bank check. A check specifies who is to receive the funds, with the order to pay the face value of the check to the order of the creditor. The exact amount of the payment is specified. The date specified on the check is often the issue date for the check, but may also be the date that the bank is to honor the payment. This process is referred to as post dating a check, since the creditor will physically receive the check at some time before it will be honored.

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It is also possible to establish one in the form of a bank draft. Like the bank check, drafts are normally set up with a fixed sum of payment, and with specific instructions of when to issue the payment to the creditor.

The bill of exchange can be a very simple document, or one that is very detailed. In many countries around the world, the use of one is a common means of conducting business, and is often accompanied by an allonge. In situations where the document is not honored, the holder is free to take legal action against the debtor according to local laws, or to sell it to a collector at a discounted rate of exchange.

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Discuss this Article

anon355708
Post 22

@post18: The answer "for each condition d is liable to p."

robel944
Post 20

What is the procedure for issuing a bill of exchange?

anon153342
Post 18

I need the answer:

D draws a bill of exchange on A, payable to P. Who is liable to P (i)Until acceptance is made by A; (ii)if A does not accept the bill of exchange; (iii) A accepts the Bill of exchange?

sklaudt
Post 17

What is the procedure for processing a bill of exchange?

anon139684
Post 15

What is the process or procedure to use a Bill of Exchange?

anon138334
Post 13

show some problems of bills of exchange.

anon130900
Post 11

what are various types of bills of exchange?

anon102819
Post 10

Where can I find a bill of exchange online?

tj38marlow
Post 9

I am looking for a solution for a failed Bill of Exchange. How to reactivate original invoices for days outsanding and dunning?

mintu
Post 8

how i can take some extra benefit on frozen exports?

mintu
Post 7

where can i find a bill of exchange form online?

anon67874
Post 6

what are various types of bills of exchange?

anon56510
Post 5

where can i find a bill of exchange form online?

anon51633
Post 4

what is the procedure for issuing a bill of exchange?

anon46123
Post 3

how do i use a bill of exchange?

anon30189
Post 2

What is the procedure for issuing a bill of exchange?

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