Bill of exchange is a common concept popular among general public. Even layman knows the meaning of the term bill of exchange. It is a document with an unconditional order in a written format. Bill is for payment of goods or for the services offered or received. It is an unconditional order by one party to another in order to pay an amount either on a fixed date or immediately. The drawee accepts bill by signing the document. Bill of will be converted in to post dated check and thus it will become a binding contract. Bill of exchange is also called as a draft.
Bill of exchange is a valuable document made between two persons for paying and receiving money unconditionally or we can say that it is an unconditional order to pay a certain amount of money to a person by another. Bill of exchange’s which can be negotiated are “to order”. The term was inserted in the instrument and shall be in a language employed in drawing the bill. Bill of exchange will pay a determinate figure of cash. On Bill name of the person to whom the amount has to pay (drawee) will be mentioned. Bill contains a time of payment and bill of exchange also contains the place where payment has to be made.
In this kind of document there should be a statement specifying the date and place where the bill of exchange was issued. It contains the name of the person to whom the payment has to be made. Bill of exchange shall also have the signature of the person who has issued it. He is called drawer. It is commonly used for payment for local and international trade. This also has a long history. The history takes as long as to the time when writing was invented by accountants for recording transactions of trade. Bill of exchange, so has a history of almost 5,000 years.
It is a form of contract. It shall have certain details pertaining to the document, then only it shall have value or else it’s just like a plain paper without any value. Bill of exchange shall be a signed document. Bill is a written order from one person to another person. Bill of exchange will be acceptable only if the holder takes it. This condition is necessary for making payment. Bill of exchange, there is a requirement by the person to whom it is addressed to give on command on a fixed or a future time an amount of money.
Thus bill of exchange is a wonderful financial instrument which can be used for daily transactions. Almost all small business owners make use of this instrument. Nowadays many online transactions are also done through this method.