What is a bill of exchange? Classification of bill of exchange

Overview of a bill of exchange

Define of a bill of exchange

A bill of exchange is an unconditional order to pay, drawn by one person to another, requiring that person upon sight of the bill of exchange or at a definite future date to pay a certain sum of money to the other person. or at the behest of one person to be paid to another or to the bearer of that draft.


The parties to the bill of exchange have rights and obligations

  • Drawer: is the person who prepares and signs the bill of exchange
  • Drawee : is the person responsible for paying the amount stated on the draft.
  •  Acceptor: is the person drawn after signing the bill of exchange.
  • Beneficiary: is the legal owner of the bill of exchange, and therefore has the right to receive payment for the amount stated on the bill of exchange.
  • Assignor: is the person who transfers the benefit of the bill of exchange to another person by hand or by endorsement.
  • Guarantor is any person who signs a bill of exchange except the drawer and the drawee.

Characteristics of a bill of exchange

– As an international means of payment, the bill of exchange is governed by international law, first of all, the Giownevow International Convention on Bills of Exchange of 1930.

A bill of exchange has a number of properties, such as abstraction, unconditional payment, and circulation.

Classify of a bill of exchange

Bills of exchange are mainly used in international commercial payments. There are many types of bills of exchange and can be identified based on the following criteria:

Based on the payment term

Bill of exchange for immediate payment

With this type of draft, the drawee, upon seeing it, is obliged to immediately pay the amount on the draft to the beneficiary without giving any reason to delay or refuse to pay if the bill is accepted. issued in accordance with the provisions of the bill of exchange and without any reason for suspending its payment.

Term bills of exchange

When this draft is presented, the drawee must sign an acceptance to pay on it. Payment is made at a specified future date.

Based on the accompanying goods documents, this bill of exchange has two types:

Clean bill of Exchange

A plain draft is a bill of exchange issued against the payer with no accompanying documents. It is often used to pay fines, compensation, fees such as insurance premiums, transportation fees, etc.

Bill of exchange with documents

This type of draft is issued to the importer (payer) accompanied by a set of cargo documents. These documents must go together and cannot be separated from each other. In international trade payments, bills of exchange are always used.

Based on the transferability, bills of exchange have the following types:

Bill of exchange by name

This bill of exchange clearly states the beneficiary’s name, does not include a payment-to-order clause, so it is non-transferable.

Anonymous bill of exchange

This type does not include the name of the beneficiary, but only the phrase “pay to the holder of the draft”. So whoever holds it is entitled to the benefits of the bill of exchange.

Bill of exchange to order

A type of bill of exchange payable to the order of the beneficiary, which is transferred by signing the transfer on the back of the bill of exchange (referred to as an endorsement).

Based on the subject of the bill of exchange, there are the following types of bills of exchange:

Commercial bill

This type is created by the exporter to demand money from the importer in payment for exported goods and related services.

Banker’s bill

This type of bill of exchange is issued by the issuing bank, ordering its correspondent bank (or branch bank) to pay a certain amount to the beneficiary of the amount stated on the draft.


Meaning of a bill of exchange

Bills of exchange are commonly used in import and export payments and are often associated with international payment forms such as collection entrustment, L/C.

In addition, a bill of exchange is used as an instrument of credit when it is discounted at a bank, or when it is circulated from one person to another during its validity as a bill of exchange. goods that are bought and sold in the money market.

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