What is Bill of exchange?

Features, Examples According to the Negotiable Instruments Act 1881, a bill of exchange is defined as “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument”.

Who makes a bill of exchange?

A bill of exchange has three parties: The drawer is the maker of a bill of exchange. The bill is signed by Drawer. A creditor who is entitled to receive payment from the debtor can draw a bill of exchange. Drawee is the person upon whom the bill of exchange is drawn. Drawee is the debtor who has to pay the money to the drawer.

Who is involved in honoring a bill of exchange?

Multiple clauses are jotted down in the document, which the parties involved need to follow. The parties involved in honoring the bill of exchange are – the drawee, drawer, and payee. A former is the one that issues the document and promises to pay on time, while a payee is a party that receives the payment made by the former.