BILLS OF EXCHANGE

DEFINE BILLS OF EXCHANGE.

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 the order of a certain person or to the bearer of the instrument.
WHAT ARE THE MAIN FEATURES OF BILLS OF EXCHANGE?
Following are the main Features of Bills of exchange:
it must be writing
it must be signed by the maker
it must be unconditional order to pay
the maker must direct a certain person to pay c certain sum of money
EXPLAIN PARTIES OF BILLS OF EXCHANGE
1. DRAWER.
The person who draws/writes the bill is known as drawer
2. DRAWEE
The person who is liable to pay the amount of bill is known as drawee.
3. PAYEE
The person who receive the amount of bill is known as payee
EXPLAIN CLASSIFICATION OF BILLS OF EXCHANGE:
1. INLAND BILLS.
Inland bills are drawn, accepted and payable in the same country
2. FOREGION BILLS.
Foreign bills are drawn in one country and accepted and payable in another country
EXPLAIN TYPES OF BILL OF EXCHANGE
1. ON THE BASIS OF PERIOD
DEMAND / USANCE BILL OF EXCHANGE.
There is no fixed date for the payment of these bills are called usance bill
TERM BILLS OF EXCHANGE.
These bills are payable after specified period of time e.g. 2 Month, 3 Month
2. ON THE BASIS OF OBJECT
TRADE BILLS.
These bills are drawn and accepted against the sale and purchase of goods.
DEFINE ACCOMMODATION BILLS.
These bills are drawn and accepted without the sale and purchase of goods. The purpose is to help
one party or both financially.
DEFINE GRACE DAYS.
Three additional days which are allowed to drawee for the payment of bill of exchange are called grace days.
DEFINE TENOR.
Tenor is the period of time after which a bill becomes payable e.g. 2 Month, 3 Month
WHAT IS MEANT BY ACCEPTANCE OF BILL?
When the drawee signs his name on the face of the bill along with the word Accepted the bill is said to be accepted
and this act of the drawee is called acceptance of a bill.
DEFINE THE HOLDER OF THE BILL.
Holder of a bill is a person who is entitle in his own right to the possession thereof and to claim the amount due
there on.

PUNJAB COLLEGE GOJRA CAMPUS

PROF.ALI HAIDER

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BILLS OF EXCHANGE
DEFINE GENERAL ACCEPTANCE.
When the bill is accepted without any condition to the order of the drawer it is called general acceptance.
DEFINE QUALIFIED ACCEPTANCE.
When a bill is accepted with some qualified to the order of the drawer it is called qualified acceptance.
DEFINE THE BILLS RECEIVABLE AND BILLS PAYABLE.
When the bill is drawn by drawer and accepted by drawee it is called bills receivable from drawer point of view and
bills payable from drawee point of view.
EXPLAIN THE DISCOUNTING OF A BILL.
If the holder of the bill is in need of money before due date of the bill he may sell it to the bank. The bank will give
cash for it in consideration of small charge. This is called discounting the bill.
DEFINE THE ENDORSEMENT OF BILL.
The procedure by which a bill is transferred from one person to another for the settlement of debts is called
endorsement of bill.
WHEN A BILL BECOMES DISHONORED?
When the drawee fails to make the payment of the bill on the due date
WHEN A BILL BECOMES HONORED?
When the drawee makes payment of the bill on the due date
DEFINE NOTING CHARGES.
In case of bill dishonored the notary public charge a small fee from the holder of the bill. The fee is known as noting
charges.
WHAT DO YOU MEANT BY RETIRING OF A BILL?
When the drawee makes payment before the due date of the bill
DEFINE PROMISSORY NOTE.
An instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of
money only to or to the order of a certain person or to the bearer of the instrument.
EXPLAIN THE PARTIES INVOLVING IN PROMISSORY NOTE.
There are two parties involving in promissory note:
MAKER: The person who draws the promissory note
PAYEE : The person who receives the amount of promissory note
EXPLAIN THE FEATURES OF PROMISSORY NOTE.
Following are the features of promissory note:
It must be in writing
It must be signed by maker
It must be an unconditional promise to pay by the maker
DIFFERENTIATE BETWEEN PROMISSORY NOTE AND BILLS OF EXCHANGE.
SR.NO
1
2
3

PROMISSORY NOTE
It is promise to pay
Two parties (Maker and Payee)
There is no need of acceptance

PUNJAB COLLEGE GOJRA CAMPUS

BILLS OF EXCHANGE
It is an order to pay
Three parties (Drawer Drawee and Payee)
It must be accepted

PROF. ALI HAIDER

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