Definition of bill of exchange

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.

1. It is an instrument in writing.
2. It contains 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 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?