Bill of exchange     {Sec. 5}

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Definition: – A ‘bill of exchange’ is an instrument in Writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain a sum of money only to, a certain person; or the order of   a certain person; or the bearer of the instrument.

 

    Essentials Characteristics of a Bill of Exchange

(a)              It must be in writing

(b)             It must contain n expresses order to pay

(c)              The order to pay must be definite and unconditional

(d)              It must be signed by the drawer

(e)              The sum contained in the order must be certain

(f)               The order must be to pay money only

(g)              Drawer, drawee  and payee must be certain (usually, same person is the drawer and payee)

(h)             It must be stamped.

 

Parties to a Bill of Exchange

(i)                Drawer:- The person who draws the bill (i.e., the person who makes the bill) is called a drawer. His liability is secondary and conditional. His liability is primary and conditional until the bill is accepted.

 (ii)    Drawee:-

1. The person on whom the bill is drawn is called as drawee.

2. On acceptance of the bill- He is called as Acceptor, he becomes liable for the payment of the Bill; his liability is primary and unconditional.

(iii)    Payee: – The person to whom money is to be paid is named in the bill. He is called as payee.

    

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