Last Updated 27 Jan 2021

A Bill Of Exchange Defenition

Words 791 (3 pages)
Views 458

The endorsed is the person to whom the bill is endorsed. The endorsed can obtain the payment form the drawer. A bill of exchange is generally used in international trade and aims at binding one party to pay a fixed amount of money to another party at a predestined future date. It is the most often used form of payment relating to local and international trade. For example, after shipping the goods, the exporter draws the bills to the importer or, most often, the bank acting on behalf of the importer, as agreed between the exporter and the importer.

The exporter usually draws on behalf of his principal or that of its bank. Later, he supports the bill in favor of the bank. Exporter can collect your bank or requests for purchase invoices. In case of purchase of the invoice, the exporter receives export earnings immediately. In all cases, the exporter's bank sends the documents to its branches or correspondents importing bank. The bank at the end returns an indication of receipt of the documents to the importer or to the payment or acceptance, depending on the nature of the invoice is issued.

In the case f documents against acceptance, importer accepts the bill, and only then get the goods. In the case of documents against payment, importer undertake to obtain the release of the payment documents. Mainly, a bill of exchange play two roles I. E. As a payment and a security instrument. Economics By resuscitation by a bill of exchange and payment by means of bill of exchange. If parties agree on payment by a bill of exchange, it actually concerns exchange of bill of exchange against performance of the contract.

Order custom essay A Bill Of Exchange Defenition with free plagiarism report


The obligation which creates the basis for a reticent bill of exchange obligation extinguishes in the moment of transfer of the bill of exchange to a creditor. Other relations among affected parties have in principle bill character. Bill of exchange plays a similar role as money there. Payment by means of bill of exchange does not concern termination of duty arising from causal relation. But the payment of bill of exchange at the same time terminates obligation implying from causal relation. Companies/Businessmen have used Bills of Exchange for hundreds of years.

They had been gaining so many advantages by sing bills of exchange. Some of those advantages are, A Bill of Exchange facilitates the granting of trade credit too buyer. When doing business, a buyer may not be able to make the payment at the time of the transaction been taken place. Most of the buyers are purchasing goods or services at credit basis. In this connection, the buyer can issue a bill of exchange, ex. Queue instead of cash. That bill of exchange is payable either on demand or an agreed future. If a Bill is payable immediately, it is usually issued payable at sight.

The term "at sight" means that a buyer should pay once they have sighted the Bill, that is once the demand for payment has been made. If a Bill is payable at some future date, it must facilitate the calculation of the actual due date. For example Bills of Exchange may be drawn payable at 30 days sight, at 30 days from Bill of Lading Date etc. Therefore, the buyer would be able to doing his business without facing any serious working capital difficulties. A Bill of Exchange provides a legal acknowledgement that a debt exists. A bill of exchange is payment method which has been established by a government act.

Therefore, no one will doubt to accept a bill of exchange for an amount to be received from another It can provide the seller with access to financing. Person or a company. Facilitates the seller with access to finance by allowing them to transfer their debts to a bank or finances by simply endorsing the bill of exchange to that bank or finances. It can provide easy access to the legal systems in the event of non-payment. Allows the finances or the banker to retain a convincing legal claim on the buyer as well as the seller.

It Permits a seller to protect their access to the legal system in case of problems, besides providing easier access to that legal system. A Bill of Exchange has the capability of provide formal documentary evidence that the demand for payment or acceptance has been made to the buyer. In addition, it may be possible to sue the buyer for non- payment based solely on this documentary evidence. A seller can protect their interests by requesting that a Bill of Exchange be noted or protested for non- payment or non-acceptance. When a Bill is not paid or accepted it is said to have been "dishonored".

This essay was written by a fellow student. You can use it as an example when writing your own essay or use it as a source, but you need cite it.

Get professional help and free up your time for more important courses

Starting from 3 hours delivery 450+ experts on 30 subjects
get essay help 124  experts online

Did you know that we have over 70,000 essays on 3,000 topics in our database?

Cite this page

Explore how the human body functions as one unit in harmony in order to life

A Bill Of Exchange Defenition. (2018, Mar 08). Retrieved from

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Save time and let our verified experts help you.

Hire writer