Bills of Exchange

General Negotiable instruments are a special category of freely transferrable obligations. Cheques, bills of exchange and promissory notes are negotiable instruments. However, negotiable instruments embrace a wider category of obligations. They include banknotes, bearer shares, bonds and debentures. Some other instruments have similar characteristics such as bills of lading and postal orders. A negotiable instrument can be transferred (assigned) by one holder to another, without […]

Acceptance and Payment Acceptance may be by payment or by commitment to pay on the designated future date, as the instrument provides. In the case of a cheque, the bank effectively accepts, it by making payment on it Where the bill provides for payment after a period, the drawee bank may accept it and thereby undertake to pay it on the due day.  A bill […]

Bills of Exchange Bills of exchange have been recognised in international commercial practice for many hundreds of years.  The Bill of Exchange Act codified the existing bill of exchange legislation.  In this respect, the legislation is similar to the Partnership Act and the Sale of Goods Act, which were enacted in the same era. A bill of exchange is an unconditional order in writing, addressed […]

Liability Generally a person is not liable on a bill, unless he or his agent, has signed it. The drawee or acceptor does not become liable under a bill, until he has accepted it.  Even if the drawee is a bank which holds an account for the drawer (thereby his debtor), a bill, such as a cheque, does not involve an assignment of the benefit […]

Nature A cheque is a bill of exchange drawn on a bank payable on demand.  The provisions of the Bills of Exchange legislation apply generally to cheques.  See the separate chapters in relation to the principles applicable. A cheque is fundamentally a direction to pay rather than an instrument that is intended to be postponed, negotiated, or discounted. Unlike other bills, it is not accepted and […]

Nature An instrument that proves entitlement to money is sometimes described as a documentary intangible. Various types of documentary intangibles have evolved by custom and practice.  Most are short simple documents. They carry the obligation to pay. Possession of the instrument (in the case of a bearer instrument) or possession with an endorsement to the possessor (in other cases) is evidence of the possessor’s entitlement […]