Bills of Exchange

What is a Bill of Exchange?

A Bill of Exchange is one of the key financial instruments in International Trade. The laws regulating Bills of Exchange in different countries come under two different legal spheres of influence:

• Bills of Exchange Act (1882) - United Kingdom
• Geneva Conventions of 1930

The Bill of Exchange is defined under these systems as follows:

Bill of Exchange Act (1882) - United Kingdom

"A Bill of Exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer".

For a list of countries following the 'Bills of Exchange Act' (click here).

Convention providing a uniform law for Bills of Exchange and promissory notes (Geneva, 1930) The League of Nations.

Under Article 1 of the above convention a Bill of Exchange must contain:

1. The term "Bill of Exchange" inserted in the body of the instrument and expressed in the language employed in drawing up the instrument.
2. An unconditional order to pay a determinate sum of money.
3. The name of the person who is to pay.
4. A statement of the time of payment.
5. A statement of the place where payment is to be made;
6. The name of the person to whom or to whose order payment is to be made;
7. A statement of the date and of the place where the bill is issued;
8. The signature of the person who issues the bill.

For a list of countries following the 'Geneva Conventions' (click here).

The Parties to a Bill of Exchange:

The Drawer - Is the party that issues a Bill of Exchange in an international trade transaction; usually the seller.

The Drawee - Is the recipient of the Bill of Exchange for payment or acceptance in an international trade transaction; usually the buyer.

The Payee - Is the party to whom the Bill is payable; usually the seller or their bankers.

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