Bill of Exchange

 

In a transaction of credit sale, seller becomes a creditor and buyer become a debtor. To avoid risk, creditor always take from debtor a written acknowledgement and a written promise to pay debts after a specified period. This written acknowledgement and promise together are called as “Bill of Exchange”. 

There are three parties to a bill of exchange.

1. Drawer:- He is a person who draws the bill. He is a creditor and he has to receive money from debtor. 

2. Drawee:- He is a person who accept the bill or Drawee is a person on whom the bill is drawn. He is a debtor and he has to pay the amount to drawer. After acceptance drawee become an acceptor. 

3. Payee:- He is a person to whom the amount of bill is payable. Payee may be a creditor of the drawer or payee may be drawer himself.

Features of Bills of Exchange 

1. It is a document in writing. 

2. It is signed by the Drawer. (A bill of exchange without the signature become invalid) 

3. It is Negotiable instrument. 

4. It should be dated and stamped. 

5. If it is drawn in Indian language is called “Hundies”.

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