Bill of Exchange-
Definition of Bill of Exchange-
Section 5 of the negotiable instrument act defines “bill of exchange” as follows. 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 sum of money, only to or to the order of a certain person or to the bearer of the instrument.
The definition given in section 5 is exhaustive enough to include both negotiable and nonnegotiable instruments. A bill of exchange is sometimes mentioned as draft.
Requisites of bill of exchange
1. A bill of exchange must be in writing – it is necessary that a bill of exchange must be written in any language, and any terms of the words may be used provided the requirement of section 5 of the act are complied with. It does not matter whether it is written with pencil or lithographed.
2. Bill of exchange must contain an order to pay – when a bill of exchange is drawn, the presumption is that there are funds in the hands of the person to whom the order is given which he is bound to pay to the persons giving the order.
The order must be in imperative terms because it is the essence of the bill of exchange. Terms of politeness are admissible but excessive politeness may lead the bill to be construed as not an order to pay.
3. The ordered content on the Bill should be unconditional – The drawer’s order to the drawee must be unconditional and not dependent on a contingency. A bill of exchange cannot be drawn so as to be payable upon the fulfilment of some conditions.
It is of the essence of the bill that it should contain an unconditional order to pay at all events. The following bills are invalid because they or invalid because they are conditional:-
(i) “to pay 60 days after the arrival of the ship, ‘victory’ at Bombay.”
(ii) to pay when C marries D daughter.”
4. The bill must be signed by the drawer – In order to constitute a valid bill it is essential that the drawer must sign it. If the bills has not been signed by the drawer no action could be maintained against the acceptor or any other party who has signed subsequently.
Thus, a bill drawn by A on B is without A’s signature and is accepted by B and negotiated to C for value. The instrument is not a valid bill of exchange. Thus, if the bill is not signed by the drawer, it is invalid.
Form of bill of exchange
A bill of exchange, like a promissory note may be written in any language and it may be in any form of the words, provided the requirements of the section are substantially complied with.
5. Drawer, Drawee and Payee must be certain – Drawer, Drawee and Payee are the necessary parties to the bill of exchange. Drawer is one who draws or makes the bill; Drawee is the one who is ordered to pay the bill and payee is the person to whom or to whose order the payment is to be made.
In the interest of all the parties it is essential that the necessary parties to the bill of exchange are distinctly and with reasonable certainty mentioned. But it is not necessary that the three parties must be different person.
The person may be Drawer and the payee the same person maybe the drawee and the payee but the same person cannot become the drawer and the drawee.
6. The payable sum must be certain – It is also necessary that the bill of exchange must state a certain sum payable on the presentation. The sum so payable must not be susceptible of contingent additions or subs tractions. Naturally, if the sum payable in the bill is not certain, the bill of exchange is not bill.
7. The instrument must contain order to pay money and money alone – The payment must be made in legal tender. It should not consist of any article of food or animal or in any bonds singly or coupled with money in species.
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