What are the types of ‘Bills of Exchange’ used in trade?

Demand bills, Usance bills, clean bills, Documentary Bills, Accommodation bills, Hundis etc. are a different kind of bills of exchange in usage for different types of trade transactions. A cheque is also a kind of bill of exchange. However, cheque has some peculiarities from other bills of exchange. If a bill of exchange drawn or made in India and made payable in India or drawn upon any person resident India, it is called inland bills of exchange. When a bill of exchange is drawn, made or made payable outside India, it is called foreign bills of exchange.

The following types of Bills of exchange are used by traders and manufacturers:

(i)            Documentary Bills: The Documentary bills are the most popular bills of exchange which are used by traders and manufacturers in India. Those documents accompanied with documents of dispatch like Lorry Receipts, Railway Receipts, Bill of Lading, Air consignment note etc., are called documentary bills.

(ii)          DP bills:  A documentary bill may be payable on demand or at a specified future date. In case, the documents of title to goods are to be delivered to the buyer of the goods (drawee) against payment of bill amount. Such bills are called DP (Delivery against Payment).

(iii)         DA bills:  In the case of the documents to the title of goods are to be delivered to the drawee (Buyer) against acceptance of bills without demanding immediate payment of bills, such bills are called DA (Delivery against Acceptance) bills.

(iv)      Clean bills: If no title to goods is attached to a bill, it is called Clean Bill. A clean bill may either be demand bill or Usance bill. A bill which is made payable, with the expression like on demand; at sight; on presentation or no time is specified is called Demand Bill.  The Demand bills are required to be paid by the drawee immediately when it is presented to him for payment.

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?