Bills of Exchange – According to the Negotiable Instruments Act, 1881, “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, or to the order of, a certain person or to the bearer of the instrument.”
Characteristics of a Bill of Exchange
(1) Written: A bill must always be in writing.
(2) Unconditional: A bill is unconditional, i.e., there is no condition attached to it.
(3) Order letter: A bill is an order letter. It is drawn by the creditor on the debtor and it is in the form of an order and not a request.
(4) Signature of the drawer: A bill must be signed by the drawer as well as the drawee.
(5) Fixed amount: A bill is drawn in the form of an order to pay a fixed sum of money.
(6) Payment to a specified person: A bill is payable to the person specified therein, or to the order of the specified person or to the bearer as the case may be.
(7) Fixed date of payment: A bill of exchange is payable either on demand or after the expiry of the specified duration.
(8) Stamped: A bill of exchange should be properly stamped.
(9) Value received: It is preferable to write “the value in the bill has been received” on the face of the bill , even though it is not required by law.
Parties to the Bill of Exchange
(1) Drawer: He is the person who draws and signs the bill of exchange. He is also known as creditor because he has the right to receive money from another person.
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(2) Drawee: He is the person on whom the bill is drawn, i.e., he is the person who accepts the bill of exchange and is liable to pay the money thereon on the due date. He is also known as the payer or the acceptor.
(3) Payee: He is the person who has the right to recetive the payment of the bill of exchange on the due date. The drawer and payee may be one and the same person or they may be different persons.
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