An unonditional order in writing, addressed by one person to another, singed by the person giving it, requiring the person to whom it is addressed to pay on demand, or a at a fixed determinable future time, a certain sum of money to or to bthe order of a specified person or a bearer.
It is drafted by an exporter and sent to an importer.
It is drawn for a period of three months or multiples of the same.
Must first be accepted by the importer ( who then writes “accepted” across the face of the bill.)
Importance of a Bill of Exchange.
An unconditional order used to secure payment.
A method of settling debts used mainly in foreign trade.
Required as part of a documentary credit.
An evidence of debt when accepted by the importer.
Can be discounted before it matures to enable the exporter to obtain early payment.
Discounting the bill prevents working capital being tied up in trade debtors.
Enables imported goods to be sold before the bill matures.
Gives the importer a period of credit before making payment.
Enables trade to exists among companies of various countries.