Bills of Exchange: Contents and Obligations

Bills of Exchange: Contents and Obligations

• Essential Bill Contents: A valid bill of exchange must include specific information:

  • The words "Bill of Exchange"
  • An unconditional payment order for a specific amount
  • Payment period
  • Payment location
  • Drawee's (person or organization to pay) name and address
  • Beneficiary's (person or organization receiving payment) name and address
  • Issuing location and date
  • Drawer's (person or organization issuing the bill) name and address

• Missing Information: If a bill lacks one of these elements, it's invalid unless:

  • Missing payment date: immediate payment upon presentation
  • Missing payment location: payment at the drawee's address
  • Missing issuing location: assumed to be the drawer's address

• Amounts Mismatched: If the numerical and written amounts differ, the written amount prevails. If multiple written amounts differ, the smallest amount is valid.

• Additional Sheets: Bills can have supplementary sheets for guarantees, endorsements, etc. The preparer attaches it, signs both the sheet and the bill.

Drawer's Obligations

• Dishonored Bills: If a bill isn't accepted or paid (dishonored), the drawer is liable to the beneficiary for the amount.

• Payment by Other Parties: If an endorser or guarantor pays the beneficiary after dishonor, the drawer becomes obligated to reimburse that party the bill's amount.

Acceptance of Bills

• Acceptance Presentation: The beneficiary must present the bill for acceptance in specific situations:

  • If drawer requires acceptance
  • For bills with a payment date that is in accordance with article 42.1(b) of the law. This must occur within 1 year of signing and issuing.

• Valid Presentation: Presentation occurs at the right place, during drawee's business hours and before the payment date.

• Alternative Presentation: Bills can be presented via registered mail (postmark date is the presentation date).

• Acceptance Period: Drawee has two business days to accept or reject the bill. Mail presentation begins from the date the drawee signs for receipt.

• Failure to Present: If the beneficiary doesn't present the bill properly, the drawer, endorser, and guarantor (except the drawee's guarantor) are released from liability.