Page 89 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 4. Endorser: It is the person who endorses the note in favour of another person.
5. Endorsee: It is the person in whose favour the note is negotiated by indorsement.

4.2.2 Meaning of a Bill of Exchange

A ‘bill of exchange’ is defined by s.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’.

Features of a Bill of Exchange

1. It must be in writing.
2. It must contain an order to pay and not a promise or request. Words, like ‘Please pay
` 10,000 to A on demand and oblige,’ do not constitute the instrument a bill of exchange.

3. The order must be unconditional.
4. There must be three parties, viz., drawer, drawee and payee. However, one person may
assume the role of two parties, e.g., a person may draw a bill of exchange in his own
favour, i.e., he may be drawer as well as a payee. He cannot, however, be a drawer as well
as a drawee because that will render that instrument a promissory note.
5. The parties must be certain.

6. It must be signed by the drawer.
7. The sum payable must be certain or capable of being made certain.
8. The order must be to pay money and money alone.
9. It must be duly stamped as per the Indian Stamp Act.

!
Caution All bills of exchange other than ‘demand bills’ must bear the adhesive stamps of
the requisite amount and the same must have been affixed either before or at the time of
execution and also cancelled.
10. The number, date and place of the bill are not essential. Oral evidence may be obtained as
to date and place of execution.

Notes 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/-Y
Address …………........................................................ Stamp
………….........................................................
Contd...

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