A bill of exchange is a written order directing a named party to pay a stated amount to a specified party either on demand or at a future date. In trade transactions, the exporter may draw the bill on the importer, which can accept it to create a time payment obligation.
How is Bill of Exchange used?
The drawer issues the bill to the drawee, ordering payment to the named payee. For a time bill, the drawee’s acceptance records its commitment to pay at maturity. The bill may then travel with trade documents, be endorsed to another holder or be presented through a bank for collection. Each signature and transfer affects who can demand payment.
What should a business document for Bill of Exchange?
Keep the original instrument where required, parties, amount, currency, issue date, maturity, acceptance, endorsements and payment or protest.
What should a business verify before relying on Bill of Exchange?
Enforceability and formal requirements vary by jurisdiction. Errors in execution or transfer can weaken the instrument.
