What is Bill of Exchange?

What is a Bill of Exchange?

Bills of exchange are contracts in which one party agrees to pay a specified amount of money to another, on demand or at a specified date. Exchange bills are similar to checks and promissory notes. Get import export consultancy services to more about bill of exchange. You can also go through import export business training in Hindi for better understanding.  In a bill of exchange, there are often three parties involved: the drawee pays the sum, the payee receives it, and the drawer is the one who obligates the drawee to pay the payee.  Bills of exchange are not contracts in themselves, but they allow parties to specify the terms of the transaction, such as the rates of accrued interest. 

  • Banks that issue bills of exchange can be referred to as draft banks.  
  • A bill of exchange may be called a trade draft if individuals release it.  
  • No matter if the funds will be charged on delivery or immediately, the bill of exchange is called a sight bill.  
  • Since they are to be charged at a specific date in the future, they are also called term bills. 

Features of Bill of Exchange- 

  • Bills of exchange should be in writing. Any verbal communication would not be accepted.  
  • The bills of exchange should specify the amount that needs to be paid and the date by which it needs to be paid.  
  • Both the drawer and the drawee must sign the bill.  
  • Payments are made to the beneficiary of the bill, a specific person, or according to a specific order.  

Advantages of Bill of Exchange-   

Legal Document-

This document has legal meaning, and if the drawee fails to make payment, the drawer will be able to recover the amount more easily. 

Discounting Facility-

When a drawer needs money right away, the bill can be discounted from a bank by paying some nominal fees to get it converted into cash. 

Endorsement Possible-

A bill of exchange can be exchanged between individuals to adjust debts. 


Give the creditor a reasonable amount of time to pay for the purchases. The agreement serves as a basis for the seller to pursue legal action against the buyer if payments are not made by the due date. The bill of exchange should be in writing. Know more about bill of exchange with Digital Eximonline import export course.   You can also attend our live webinar. Click the link to join.  https://chat.whatsapp.com/Bqz4SWH55nSGtKj3GnJAC8 Do visit our website! 

About Author

Sed ut perspiciatis unde omnis iste natus err or sit voluptatem accusantium dolore mque laudantium, totam rem aperiam, eaque ipsa quae ab illo inventore veritatis et quasi architecto beatae vitae dicta sunt

Direct EXIM Trade

About KTD Ambica Group

33+ Years Experience
1000+ crore Cargo handled
15000+ Clients Consulted
30+ Countries network