Bill of Exchange

A written, unconditional order by one party (the drawer) to another (the drawee) to pay a certain sum, either immediately (a sight bill) or on a fixed date (a term bill), for payment of goods and/or services received. The drawee accepts the bill by signing it, thus converting it into a post-dated check and a binding contract.

A bill of exchange is also called a draft but, while all drafts are negotiable instruments, only "to order" bills of exchange can be negotiated. According to the 1930 Convention Providing A Uniform Law For Bills of Exchange and Promissory Notes held in Geneva (also called Geneva Convention) a bill of exchange contains:

(1) The term bill of exchange inserted in the body of the instrument and expressed in the language employed in drawing up the instrument.

(2) An unconditional order to pay a determinate sum of money.

(3) The name of the person who is to pay (drawee).

(4) A statement of the time of payment.

(5) A statement of the place where payment is to be made.

(6) The name of the person to whom or to whose order payment is to be made.

(7) A statement of the date and of the place where the bill is issued.

(8) The signature of the person who issues the bill (drawer). A bill of exchange is the most often used form of payment in local and international trade, and has a long history- as long as that of writing.