Q.16. Define a bill of exchange and its
different kinds.
BILL OF
EXCHANGE
A bill of exchange is a written
acknowledgment of a debt. It is written by the credit and accepted by the
debtor. Section 5 of the Act define a bill of exchange as ‘’An instrument in
writing containing an unconditional order, signed by the makers directing a
certain person to pay a certain sum of money only to, or to the order of a
certain person or to the bearer of the instrument.
Kinds of Bill of Exchange
A bill of exchange is of the
following types.
i. Inland
Bill
A bill of exchange which is drawn in
a country and is payable anywhere in the same is called an Inland Bill. For
example if a bill is drawn in Pakistan and is payable in any city of the
country it will be considered as an Inland Bill.
ii. Foreign
Bill
If a bill is drawn in one country but
is payable in any other country, this type of bill of exchange is called a
foreign bill. For example it has been drawn by a businessman in Pakistan in the
name of other businessman living in Japan, the payment of the bill of exchange
will be among the two businessman of different nations therefore this kind of
bill of exchange is called Foreign Bill.
iii.
Commercial Bill
A bill which is drawn for business
purposes is called a Commercial bill. Sometimes a businessman does not pay in
cash but issues a bill which is payable in some future date such type of a bill
is called a Commercial Bill.
iv.
Accomodation Bill
An accommodation bill is a bill
whereof the acceptor according to the terms of the instrument stands as a
surety for some other person who may or may not be a party thereto.
v. Time Bill
These are such type of bills which
are payable on demand on some specified dates. These specified dates may be of
present or future.
vi. Demand
Bill
The bills which are payable on demand
are called demand bills. Such type of bills are generally used for specific
purposes.
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