what is bills of exchange? Features and parties to a bills of exchange!

Bills of Exchange

When a trader sells goods on credit, he becomes the creditor, and the buyer becomes his debtor. The creditor (i.e. the seller)  has to get from the debtors (i.e. the purchaser) the amount of goods sold on credit on a later date. Very often, the creditor likes to have a written promise from his debtor to pay the amount of goods on a certain date. For this purpose, the creditors the creditor orders his debtor to pay  the amount of goods either to him or to his order or to the bearer of the Instrument. This written order for payment issued by the creditor to his debtor is called a Bill of Exchange.

A bill of exchange is legally defined as  "An Instrument in writing, containing an unconditional order, sign by the maker, directing a certain person, to pay on demand or at a fix or determinable future date, a certain sum of money only, to or the order of a certain purpose, or to the bearer of the Instrument."

Features of bill of exchange

These are the following important feature of bill of exchange:-

1. It must be in writing.
2. It must be an order to pay and not a request to pay.
3. The order must be unconditional i.e. no condition should be attached to the order.
4. The order must be signed by the maker, i.e. the drawer.
5. The order must be directed to a certain person mentioned in the Instrument.
6. The order must be for the payment of money only.
7.  The money payable must be certain, and not vague.
8. The money must be payable to a certain person, mentioned in the Instrument or to the bearer of the Instrument.
9. It must be payable on demand or after definite period of time.
10. It must be bear the required revenue stamps.
11. It must be accepted by drawee. Acceptance is necessary in the case of a time bill.

Parties to a bill of exchange

These are the following parties involved in a bill of exchange:

(a) Drawer is the person who draws the bill of exchange.

(b) Drawee is the person on whom the bill of exchange is drawn. The drawer becomes the acceptor after he accepts  the bill.

(c)  Payee is the person to whom payment is to be made on due date.