Bill of exchange

Section 5 defines a bill of exchange is “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to order of, a certain person or to the bearer of the instrument.” A bill of exchange is also called a draft.

Parties to the BOE

There are three parties to a bill of exchange, namely

drawer, drawee and payee.

1.The maker of the bill is called the drawer. 2. The person who is ordered to pay is called

the drawee and 3. The person to whom or to whose order the

money is directed to be paid is called the payee.

In some cases drawer and payee may be one person.

Essentials of a bill of exchange:

1. It must be in writing.2. It must contain an unconditional order to pay.3. It must be signed by the drawer.4. There must be three parties to the instrument and the

parties must be certain.5. The order must be to pay a certain sum of money.6. The instrument must contain an order to pay money

and money only.7. It must comply with the formalities as regards date,

consideration, stamp etc.

endorsement

A legal term that refers to the signing of a document which allows for the legal transfer of a negotiable from one party to another.