Chapter 4: International Payment Instruments

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Questions and Answers

What is the role of the drawee in a bill of exchange?

To issue the bill of exchange

To provide consent to pay as per the drawer's order (correct)

To endorse the bill to the beneficiary

To transfer the bill to another party

Which of the following statements is true regarding transferability of a bill of exchange?

It must be payable to order or to bearer (correct)

A bill of exchange must be signed by the beneficiary to be transferable

It must have marks that indicate non-negotiable status

The drawer can prevent transfer to a bearer

What happens if the drawee dishonors the draft of a bill of exchange?

The bill becomes void

The drawee must pay the beneficiary directly

Any prior endorser or the drawer must make the payment (correct)

The payment is canceled

In a bill of exchange, who is referred to as the endorser?

The person who transfers the bill to another Signup and view all the answers

Which method of payment identifies the drawee as the issuing bank?

Letter of Credit (L/C) Signup and view all the answers

What is a key feature of a bill of exchange in terms of legal protection?

It acts as an order to pay, not just a request Signup and view all the answers

What is indicated by a blank endorsement on a bill of exchange?

Transferable to the bearer Signup and view all the answers

Who is the beneficiary in the context of a bill of exchange?

The seller/exporter or someone designated by them Signup and view all the answers

What must be true for a bill of exchange to be classified as a negotiable instrument?

It must have a specific amount stated on it Signup and view all the answers

What is the primary purpose of a bill of exchange?

To facilitate payment at a fixed or determinable future time Signup and view all the answers

Which of the following governs bills of exchange in the UK?

The Bills of Exchange Act 1882 Signup and view all the answers

Under the law, what is required for a date included in a bill of exchange to be considered determinable?

It must be a fixed date that is known in advance Signup and view all the answers

What does the Law on Negotiable Instruments in Vietnam cover regarding bills of exchange?

It regulates the issuance and transfer of negotiable instruments Signup and view all the answers

Which convention affects nations that have signed the relevant agreement concerning bills of exchange?

The Geneva Convention 1930 Signup and view all the answers

Which of the following statements is true regarding the nature of a bill of exchange?

It can be unconditional but requires adherence to local regulations Signup and view all the answers

In the context of international trade, when is a bill of exchange typically used?

At the point of payment for goods Signup and view all the answers

What role does the bill of exchange play in the financing transactions?

It can be used as collateral for loans Signup and view all the answers

What is a common misconception regarding the timing of payment in a bill of exchange?

Payments can only occur at specified dates Signup and view all the answers

Which of the following statements best describes the relationship under the Law on Negotiable Instruments regarding parties involved?

It can involve both domestic and foreign individuals Signup and view all the answers

Study Notes

Bill Of Exchange

Most common international payment instrument
Unconditional, written order from one person (drawer) to another (drawee), signed by the drawer, requiring the drawee to pay on demand or at a determined future time a set sum of money to a specific person (beneficiary) or bearer (anyone holding the bill)

Governing Laws

Geneva Convention Providing a Uniform Law for Bills of Exchange and Promissory Notes (1930)
- Affects nations that signed the convention
Bills of Exchange Act 1882 (UK)
Article 3 of the Uniform Commercial Code (US)
Law on Negotiable Instruments (Vietnam, 2005)

Parties Involved

Drawer: The person ordering the payment. Usually the seller/exporter.
Drawee: The person obliged to pay.
- Under a Letter of Credit: The issuing bank.
- With other methods: The importer.
Beneficiary: The person who receives payment. Usually the seller/exporter, but can be another party designated by the drawer.
Others:
- Endorser: The person who transfers the bill to another by writing their signature on the back.
- Endorsee: The person to whom the bill is transferred.
- Acceptor: The drawee who agrees to pay by signing the bill.
- Holder: The person in possession of the bill, who is legally entitled to receive payment.

Key Features

Transferability:
- B/E must be payable to order or bearer to be considered a negotiable instrument.
- Transfer should be done through proper endorsement ("pay to order" draft), handover/delivery with blank endorsement, or blank endorsement for bearer drafts.
Legal Protection of Payment:
- B/E is an order to pay, not a request.
- Drawee cannot refuse payment unless they prove the B/E is illegal.
- If the drawee dishonors the draft, the payment must be made by the drawer or a prior endorser.

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Description

Explore the essentials of the Bill of Exchange, a key instrument in international payments. Learn about the roles of the drawer, drawee, and beneficiary, and the governing laws that regulate its use across different countries. This quiz provides insights into its historical context and practical applications.