Bill Of Exchange As A Negotiable Instrument

Bill Of Exchange as a Negotiable Instrument1

It is worth considering “Bill Of Exchange as a Negotiable Instrument”- Educareguide topic of attention.

Indeed, many people, especially students researching the field of business, may come across the concept of Negotiable instruments.

So, what is a negotiable instrument, and how do businesses use it to affect the payment of goods and services?

Assuredly, you find the answer to this question in this guide, so stay glued to the page.


Definition Of Bill Of Exchange

A bill of exchange is a signed, written order by which one party (drawer) instructs another party (drawee) to pay a specified amount of money to a third party (payee).

Therefore, the Ghana Bills of Exchange Act, 1961 (Act 55 defines a bill of exchange as: “an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed, 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 or the bearer.”

Also, a Negotiable instrument is an unconditional order or promise to pay an amount of money, easily transferable from one person. to another


Parties To A Bill Of Exchange as a Negotiable Instrument

Therefore, there are three parties to a bill of exchange. And they are:

The Drawer:

The person who gives the order to pay

The Drawee:

The person to whom the order to pay is given

The Payee:

The person to whom payment is to be made


Features Of A Bill Of Exchange as a Negotiable Instrument

Notably, the following are the characteristics possessed by a bill of exchange:

  • Firstly, it must be in writing.
  • Secondly, the order must be unconditional. This means that the debtor has no option but to pay the amount stated on the bill of exchange.
  • Thirdly, one person addresses it to another as an order to pay. The drawer writes the bill and sends it to the payee for the amount stated on the bill to be paid to the payee.
  • Fourthly, it must require payment to be made to a specified person or to the bearer. The person to whom the payment is made is the payee.
  • Furthermore, the drawer must sign it.
  • Also, it must require the buyer to pay a sum of money on-demand or in a fixed future.
  • Again, the buyer must accept the bill by writing the word accepted across its face and followed by his signature.
  • Lastly, it must order payment of a sum certain in money.

Furthermore, several examining bodies,  including WAEC, ask questions on this sub-topic many times in the Business Management examination.

Therefore, Educareguide is here to assist you in fully understanding this topic very well.


Frequently Asked Questions On Bill Of Exchange as a Negotiable

  • First, what is a bill of exchange?
  • Second, what are the characteristics of a bill of exchange?
  • Also, state and explain the features of a Bill Of Exchange as a Negotiable Instrument.
  • Again, state the parties to a Bill Of Exchange as a Negotiable Instrument.

Even though the bill of exchange is not a very popular document for settling debt in small-scale enterprises, some large firms often use it in their financial operations.

Also, though it may not be very popular in less developed countries in Africa, such as Nigeria, Ghana, Sierra Leone, The Gambia, Malawi, South Africa, Namibia, Kenya, Rwanda, Liberia, etc., it is quite used in developed countries.

For example, countries such as the United States, United Kingdom, Germany, Canada, Australia, France, Spain, etc., use it in financial transactions.


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