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Meaning of Bill of Exchange

A bill of exchange is a written acknowledgement of debt, given by the debtor to his creditor, for the sum due and the time of payment as well as the date and place of payment being set down.


A bill of exchange has been defined as 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.

Parties to A Bill of Exchange

There are three parties to a bill of exchange :

(a) Drawer, i.e., the person who draws the bill. He is the creditor to whom the amount is owing.

(b) Drawee, i.e., the person to whom the bill is addressed or an whom it is drawn. He is the debtor who owes the amount. After he accepts the bill, he is called the ‘Acceptor’.

(c) Payee, i.e., the person to whom the sum of money is payable.

Essential Characteristics of A Bill of Exchange

(a) A bill of exchange is an unconditional order.

(b) It must be in writing.

(c) It must be dated.

(d) It is addressed by one person to another.

(e) It must contain an order to pay a fixed amount of money.

(f) The amount must be payable to a specified person or to his order or to the bearer of the bill.

(g) The draft must be accepted by the party on whom the order is drawn and addressed.

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