What is a Bill of Exchange?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum
A bank check is a common example of a bill of exchange.
A bank check is a common example of a bill of exchange.

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.

A payment due date is cited in the text of bills of exchange.
A payment due date is cited in the text of bills of exchange.

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.

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.

A bank draft, which can be used to establish a bill of exchange.
A bank draft, which can be used to establish a bill of exchange.

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.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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Discussion Comments

anon355708

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

robel944

What is the procedure for issuing a bill of exchange?

anon153342

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

What is the procedure for processing a bill of exchange?

anon139684

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

anon138334

show some problems of bills of exchange.

anon130900

what are various types of bills of exchange?

anon102819

Where can I find a bill of exchange online?

tj38marlow

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

mintu

how i can take some extra benefit on frozen exports?

mintu

where can i find a bill of exchange form online?

anon67874

what are various types of bills of exchange?

anon56510

where can i find a bill of exchange form online?

anon51633

what is the procedure for issuing a bill of exchange?

anon46123

how do i use a bill of exchange?

anon30189

What is the procedure for issuing a bill of exchange?

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    • A bank check is a common example of a bill of exchange.
      By: Tan Kian Khoon
      A bank check is a common example of a bill of exchange.
    • A payment due date is cited in the text of bills of exchange.
      By: vicky
      A payment due date is cited in the text of bills of exchange.
    • A bank draft, which can be used to establish a bill of exchange.
      By: Kitch Bain
      A bank draft, which can be used to establish a bill of exchange.