Definition of bill of exchange

Section 5 of the NI Acts 1881 defines a 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 the bearer of the instrument.”

From the above, we can call an instrument a “bill of exchange” if it satisfies the following conditions.

1. It is an instrument in writing.
2. It contains an unconditional order directing a certain person to pay a certain sum to the order of or to the bearer of the instrument.
3. 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 the Negotiable Instrument Act 1881.

Click to know Varieties of Bills of Exchange used in trade

Click below for related articles

1. Definition of a Cheque

2. Definition of bill of exchange

3. Definition of Promissory Note

4. Definition of Usance Bills
5.  difference between a bill of exchange and a Cheque

6. Difference between Bills of Exchange and Promissory Note

7. Difference between Hundi and Hawala

8. Varieties of Bills of Exchange used in trade

9. What is a negotiable instrument?

10. Who are the parties to a negotiable instrument?