Bill of Exchange

1. Financial Documents
 Bill of Exchange
 A bill of exchange is popularly known as bill.
 Under section 5 of the Indian Negotiable Instruments Act, bill of exchange
means “ an instrument in writing containing an unconditional order, signed by
the maker, directing a certain person to pay a certain sum of money only to. Or
to order of a certain person, or to the bearer of the instrument.”
 Bill of exchange is an instrument or draft used for the payment in
international/export business.
 The person to whom the bill of exchange is addressed is to pay either on
demand or at a fixed or a determinable future.

2.  Payment through a bill of exchange is a common method of payment in international
trade.
 An exporter draws a bill on an importer calling upon him to pay a specified sum of
money on an appointed date. The bill will be sent to the importer who will sign it by
giving his consent. A banker of the importer may also accept the bill on behalf of his
client.
Bill of
Exchange
An instrument or draft
used for the payment in
international/export
business
An unconditional order,
signed by the maker,
directing a certain
person to pay a certain
sum of money

3. There are three parties to the bill of
exchange
1. The drawer (exporter):
 The person who executes the bill and the payment is due to him
2. The drawee (importer):
 The person on whom the bill is drawn and is expected to make the payment as
per the terms of the document
3. The payee (exporter or his bank):
 The party which receives the payment of the bill.

5.  The exporter will sent the bill of exchange to the bank along with the
documents attached, with the instructions to send them abroad for
collection.
 The banker is instructed to deliver the documents to the importer against
acceptance or payment of bill.
 In case the documents are to be released against the acceptance of the
bill, bill is called documents against acceptance bill.
 But where the documents are to be released only against payment, it is
called documents against payment bill.
 If no documents of title to the goods are enclosed to the bill, it is called a
clean bill.