Definition of Bill of Exchange
A bill of exchange is 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 the order of certain person or to the bearer of the instrument.
Drawer: The person who orders the payment
Drawee : The person to whom the order is given.
Payee: The person to whom the payment has to be made.
Drawer & payee may be the same person.
Essential Elements of a Bill Of Exchange
Date, Time, Amount, Parties, Stamp, Value Received, Acceptance are essential elements of a bill of Exchange.
Features of a Valid Bill of Exchange
- It should be in writing and should be unconditional.
- It should be signed by the drawer of the instrument.
- It must contain a certain amount of money which has to be paid.
- Drawer, Drawee and payee must be certain & exact person.
- It must contain a date & must be stamped.
- Bill must be accepted by the party on whom it is drawn & addressed.
- It is a negotiable instrument and can be transferred hand to hand in settlement of order.
- It is a riskless instrument as we do not require carrying money from one place to other.
- The debtor enjoys the full credit as he is not imposed to pay the amount of bill before the due date
- Payment can be enforced on a bill of exchange in a court of law.