Bill of Exchange

the order of a certain person or to the bearer of the instrument. The following features of a bill of exchange emerge out of this definition. A bill of exchange must be in writing. It is an order to make payment.

The order to make payment is unconditional. The maker of the bill of exchange must sign it. The payment to be made must be certain. The date on which payment is made must also be certain.

The bill of exchange must be payable to a certain person. The amount mentioned in the bill of exchange is payable either on demand or on the expiry of a fixed period of time. It must be stamped as per the requirement of law. A bill of exchange is generally drawn by the creditor upon his debtor.

It has to be accepted by the drawee (debtor) or someone on his behalf. It is just a draft till its acceptance is made. For example, Amit sold goods to Rohit on credit for Rs. , for three months.

To ensure payment on due date Amit draws a bill of exchange upon Rohit for Rs. , payable after three months. Before it is accepted by Rohit it will be called a draft. It will become a bill of exchange only when Rohit writes the word “accepted” on it and append his signature thereto communicate his acceptance.