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bill of exchange

A Dictionary of Business and Management | Date: 2006

bill of exchange An unconditional order in writing, addressed by one person (the drawer) to another (the drawee) and signed by the person giving it, requiring the drawee to pay on demand or at a fixed or determinable future time a specified sum of money to or to the order of a specified person (the payee) or to the bearer. If the bill is payable at a future time the drawee signifies acceptance, which makes the drawee the party primarily liable upon the bill; the drawer and endorsers may also be liable upon a bill. The use of bills of exchange enables one person to transfer to another an enforceable right to a sum of money. A bill of exchange is not only transferable but also negotiable, since, if a person without an enforceable right to the money transfers a bill to a holder in due course, the latter obtains a good title to it. If the drawee or acceptor of the bill is a bank, the bill is known as a bank bill or in the USA as a banker's acceptance. If it is a trader, it is called a trade acceptance. These bills have a standard 90 days to maturity and their attractiveness will depend on whether they are eligible for rediscounting at the central bank. See accommodation bill; bills in a set; dishonour.


© A Dictionary of Business and Management 2006, originally published by Oxford University Press 2006.