Bill Of Exchange as a Negotiable Instrument

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


Bill Of Exchange as a Negotiable Instrument1


Truly, many people, especially students conducting research in the field of business may come across the the concept of Negotiable instruments.

Now, what really is negotiable instrument and how is it used in business to effect payment of goods and services?

Certainly, you find answer to this question in this guide, so stay clued to the page.


Definition Of Bill Of Exchange

As a matter of fact, 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).

Surely, a bill of exchange is defined under the Ghana Bills of Exchange Act, 1961 (Act 55) 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

Certainly, 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 mean that the debtor does not have any option but to pay the amount stated on the bill of exchange.
  • Thirdly, one person addresses it to another as a order to pay. The drawer is the who 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 asks questions on this sub-topic many times in the Business Management examination.

Therefore, educareguide is here to assist you in to fully understand 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 bill of exchange is not a very popular document for settlement of debt in small-scale enterprises, some large firms use it very often in their financial operations.

Also, though it may not be very popular in less developed countries 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 United Sates, United Kingdom, Germany, Canada, Australia, France, Spain, etc. use it in financial transactions.


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