BNET Business Dictionary
Business Definition for: Bill Of Exchange
- an unconditional order in writing from one person (the drawer) to another (the drawee and signatory), requiring the drawee to pay on demand a sum to a specified person (the payee) or bearer. It is now usually used in overseas trade and the drawee may be a bank as opposed to an importer.
The supplier or drawer usually submits the bill with the related shipping documents. It is then accepted by the drawee either as the agreed or implied method of payment. On receipt, the drawee either makes the required payment, or, if payment is to be made at a future date, indicates acceptance by signing it.
Wording on the bill will state when payment has to be made, for example, "60 days after date, we promise to pay…" means 60 days after the date of the bill; "60 days after sight, we promise to pay…" means 60 days after acceptance; and "at sight" means the bill is payable upon presentation.
Once accepted, a bill of exchange is a negotiable instrument. The drawer can therefore obtain the money it represents by selling it to a financial institution at a discount. In the United States, the law relating to these instruments is found in the Uniform Commercial Code.
- a negotiable instrument, drawn by one party on another, for example, by a supplier of goods on a customer, who, by accepting (signing) the bill, acknowledges the debt, which may be payable immediately (a sight draft) or at some future date (a time draft). The holder of the bill can thereafter use an accepted time draft to pay a bill to a third party, or can discount it to raise cash.
Additional Resources
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