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What is Bill of Exchange
Bill of Exchange is a negotiable security containing a written commitment. The bill is actually written proof of financial commitment.

Bill of Exchange is a negotiable security containing a written commitment. The bill is actually written proof of financial commitment.

Bill of exchange is a command of drawer to drawee to pay to payee a pecuniary sum on a certain day at a certain place. Usually has the following information:

  • A sign that it is a bill of exchange
  • Unconditional order to pay a certain sum of cash
  • Drawee’s name - who has to pay
  • Due date of the bill
  • Indication of the place where the bill is to be paid
  • Payee’s name - the person should be paid
  • Date and place of issuance
  • Drawer’s signature

Bill of exchange in practice: Bill of exchange allows to its proprietor the right to require payment within the time specified on the bill. Bill of exchange is used as collateral for better enforcement of obligations or credits, as collateral transactions, and it may be part of a documentary letter of credit. Companies can also use bills of exchange as a source of short-term financing.

Bill of Exchange is similar to the promissory note and checks. Unlike the promissory note, it is convertible to the third party (see Endorsement).

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Last update: 29.09.2016

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