Page 180 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes 14.3.2 Bill of Exchange

A ‘bill of exchange’ is defined by Sec.5 as ‘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’.

Note Specimen of a Bill of Exchange
` 10,000 New Delhi – 110 016
Jan. 13, 2006

Six months after date pay to A or order/bearer the sum of ten thousand rupees only for
value received.
To X Sd/-A
Address……………. Stamp

Here Y is the drawer, A is the payee and X is the drawee. X will express his willingness to pay
‘accepting’ the bill by writing words somewhat as below across the face of the bill:
ACCEPTED

Sd-X Jan. 16, 2006.

The specimen given above is of a usance bill, payable after a specified period of time. A bill of
exchange may be drawn payable ‘at sight’, i.e., on demand or payable ‘after certain time after
sight’ also.

Note There are only two parties – the maker (debtor) and the payee (creditor) in
promissory note, and there are three parties – the drawer, the drawee and the
payee although drawer and payee may be the same person in bill of exchange.

Parties to a Bill of Exchange

The parties of bill of exchange are:
1. Drawer: The person to whom the amount of the bill is payable.

2. Drawee: The person on whom the bill is drawn. Thus, drawee is the person responsible for
acceptance and payment of the bill. In certain cases however a stranger may accept the bill
on behalf of the drawee.
3. Payee: The person to whom amount of the bill is payable. It may be the drawer himself or
any other person.
4. Holder: It is the original payee but where the bill has been endorsed, the endorsee. In case
of a bearer bill, the bearer or possessor is the holder.
5. Endorser: It is the person who endorses a bill.
6. Endorsee: It is the person to whom the bill is negotiated by endorsement.
7. Drawee in case of need.

8. Acceptor for honour.

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