Advantages of Bill of Exchange
The bills of exchange as instruments of credit are frequently accepted in business because of the following advantages:
- Framework for relationships: A bill of exchange represents a device, which provides a framework for enabling the credit transaction between the creditor and debtor on an agreed basis.
- Certainty of terms and conditions: The creditor and the debtor are fully aware of the date by which they have to receive/pay the money. This is due to the fact that terms and conditions of the relationships between debtor and creditor such as amount required to be paid; date of payment; interest to be paid, if any, place of payment are clearly stated in the bill of exchange.
- Convenient means of credit: A bill of exchange enables the buyer to buy the goods on credit and pay after the period of credit. It also enables, the seller of goods even after extension of credit can get payment immediately either by discounting the bill with the bank or by endorsing it in favour of a third party.
- Conclusive proof: The bill of exchange is a legal evidence of a credit transaction implying thereby the buyer has obtained credit from the seller of the goods, therefore, he is liable to pay to the seller. In the event of refusal of making the payment, the law requires the creditor to obtain a certificate from the Notary to make it a conclusive evidence of the happening.
- Easy transferability: A debt can be settled by transferring a bill of exchange through endorsement and delivery.