Bill of Exchange

Bill of Exchange is one of the important negotiable instruments in the mercantile world and used as a vital document facilitating settlement of payments between buyer/importer and seller/exporter at home and abroad.

As per Section 5 of Negotiable Instrument Act, 1881 defines Bill of Exchange as, “A Bill of Exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed determinable future time a certain some of money only to, or to the order of a certain person or to bearer of the instrument.”

Essential characteristics of a Bill of Exchange:

(i)    It must be writing with date.
(ii)    It must contain an order to pay on demand or at fixed or determinable future time.
(iii)    The order must be on unconditional.
(iv)    It must be signed by the drawer.
(v)    The drawer, drawee and payee must be certain.
(vi)    The amount must be certain.
(vii)    It should be properly stamped.

Parties of a Bill of Exchange:
There are usually three parties of a Bill of Exchange. They are Drawer, Drawee and Payee. But sometimes additional two parties Acceptor and Endorser includes in a Bill of Exchange.

(i) Drawer: The maker of a Bill of Exchange (B/E) is called the drawer. The drawer is the person to whom debt is due. The drawer of a B/E by drawing it engages that on due presentment it shall be accepted and paid according to its tenor and if it is dishonoured, he shall compensate the holder or any endorser who is compelled to pay it.

(ii) Drawee: The person thereby directed to pay is called the drawee. He is to accept the B/E to make it a legal one and he is not liable until and unless he has accepted it.

(iii) Payee: The payee is the person or to whose order the amount of instrument is payable. When the payee is the same as the drawer and his rights and objections as payee are merged with his rights and obligations as drawer. But if the payee is a person other than the drawer, the payee has the right of recourse to the drawer until the bill is paid by the drawee.

(iv) Acceptor: After the drawee of a Bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the holder or to some person on his behalf, he is called the Acceptor.

(v) Endorser: The endorser is a person who endorses the Bill by signing his name usually on the back of it. He may be the payee or a subsequent endorser to whom the payee has assigned the bill. The endorser is liable to subsequent endorser or to any future holder of the bill and his obligations are the same as those of the drawer.

Specimen

(i) Specimen of Demand Bill of Exchange:

Tk.10,000/-                                                                                            Dhaka                                                                                                             28.8.2007 On demand pay to Mr. Karim or order a sum of Taka Ten thousand only, value received. To Mr. X                                                                                                         Stamp Address                                                                                                 Sd/-Mr. Y

(ii) Specimen of Time Bill of Exchange:

Tk.10,000/-                                                                                            Dhaka                                                                                                             28.8.2007 Three months after date pay to Mr. Karim a sum of Taka Ten thousand only, Value received. To Mr. X                                                                                                         Stamp Address                                                                                                 Sd/-Mr. Y

Classification of Bills:

(i)    Inland and Foreign bills
(ii)    Time and Demand bills
(iii)    Trade and accommodation bills
(iv)    Clean bill and Documentary bills
(v)    Domiciled bill
(vi)    Maturity/Due date of bill.

Inland bill: As per section 11 of N.I. Act, “A promissory note or bill of exchange or cheque drawn or made in Bangladesh and made payable in, or drawn upon any person resident in Bangladesh shall be deemed to be an inland instrument.

Foreign bill: As per section 12 of N.I. Act, “Any such instrument not so drawn, made or made payable shall be deemed to be a foreign instrument.” For example, a bill drawn in Bangladesh but accepted in England or vice versa is a foreign bill.

Time bill: A bill is said to be time bill which is payable at a determinable future time. It is also termed as Document against acceptance (D.A bill). Time bill also called Usance bill.

Demand bill: A bill is said to be demand bill which is payable on demand or at sight or on presentation and when no time for payment is specified in it. Demand bill also termed as Sight bill.

Trade bill: A bill drawn and accepted for a genuine trade transaction is termed as trade bill.

Accommodation bill: A bill drawn and accepted not for a genuine trade transaction but only to provide financial help to some party is termed as an accommodation bill.

Clean bill: A bill which has no documents attached is called clean bill.

Documentary bill: A bill which has documents attached is called Documentary bill.

Domicile Bill: A domicile bill is one which is payable at a place other than the acceptors usual residence or business place.

Maturity or Due date of bill: Maturity date is the date on which a Bill of Exchange is payable. In calculating the due date of a bill calendar months are reckoned.