What is Bill Of Exchange?
As per Section 5 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 only to, or to the order of, a certain person or to the bearer of the instrument.”
A bill of exchange is a written acknowledgement of the debt, written by the creditor and accepted by the debtor.) It is called a draft before its acceptance. Therefore, one of the underlying features of a bill of exchange is that it has to be accepted either by the person upon whom it is drawn or by someone else on his/her behalf.
For example,
‘A’ sold goods to ‘B’ on credit for 20,000 for three months. If agreed so, ‘A’ can draw a bill of exchange upon ‘B’ for? 20,000 payable after three months. Before it is accepted by ‘B’ it will be called a draft. It will become a bill of exchange only when ‘B’ writes the word “accepted” on it and puts his signature to communicate the acceptance.
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