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Bill of exchange
Practical Law UK Glossary 9-107-6495 (Approx. 3 pages)
Glossary
Bill of exchange.
Also called a draft. An unconditional order in writing, addressed by one person (the drawer) to another (the drawee), signed by the drawer, requiring the drawee to pay on demand, or at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified person (the payee), or to bearer (section 3, Bills of Exchange Act 1882).
- A bill of exchange payable on demand is called a sight bill or draft. On delivery of a sight bill to the drawee, the drawee pays immediately.
- A bill of exchange payable at some future date is called a time bill.
- A bill of exchange where party signing as drawer, acceptor or indorser does not receive value for doing so is an accommodation bill.
Where a bill of exchange is drawn (that is, issued) in the context of a contract for the sale of goods abroad where the seller is paid under a letter of credit, the drawer is the seller, the drawee a bank and the payee typically the nominated bank, a third party bank or a discount house.
Bills of exchange are negotiable instruments.