14/10/2018
What is Bill of Exchange?
After shipping the goods, the documents for import along with the bill of exchange are submitted to the exporter’s bank. Then, the exporter’s bank then send it to the foreign buyer through buyer’s bank. The said bill of exchange draws in duplicate as per the specified format. The bill of exchange contains the reference details of the shipment, amount of invoice to be receivable from the overseas buyer, the time of payment to be affected, bank details etc.
A draft is the signed order of the drawer, given to a drawee who in possession of money to which the drawer is entitled, to pay a sum of money to a third party, the payee, on demand or at a definite time. A check is an example of a draft, which is drawn on a bank and payable on demand. The three parties include the drawer, the drawee bank, and the payee.
A documentary draft is used to expire payment in a documentary sale.
These negotiable instruments can serve two purposes:
√ They act as a substitute for money
√ They act as a financing or credit service
What are the Requirements of a Bill of Exchange?
A bill of exchange should be:
√ An unconditional order in writing
√ Addressed by one person to another
√ Signed by the person giving it
√ It requires that the person pay the amount on demand or
at a fixed or determinable future time
√ A sum certain in money
√ To or to the order of a specified person or to bearer
