The Section 5 of the NI acts 1881 defines bill of exchange as under
“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 to, or to the order of, a certain person or to the bearer of the instrument.”
From the above, we can call an instrument as “bill of exchange” if it satisfies the following conditions.
- It is an instrument in writing.
- It contains unconditional order directing a certain person to pay a certain sum to the order of or to the bearer of the instrument.
- It is signed by the maker.
The bills of exchange are a kind of negotiable instruments generally arising out of trade transactions. The major advantage of bills of exchange is that the drawer of a cheque or acceptor of a bill of exchange is liable to discharge his liability as a principal debtor under Negotiable Instrument Act 1881.
Click to know Varieties of Bills of Exchange used in trade
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