Economics

Topics: Money, Payment, Credit card Pages: 3 (1013 words) Published: October 23, 2014
As defined in the Bills of Exchange Ordinance Act No.25 of 1927, a Bill of Exchange is 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 to bearer.

There are five important parties of a bill of exchange;

Drawer: The drawer is the person who has issued the bill. In an export transaction, exporter draws the bill as money is owed to him.

Drawee: The drawee is the person on whom the bill is drawn. Exporter draws the bill on the importer who is the drawee. Drawee is the debtor who owes money the exporter (creditor).

Payee: The payee is the person to whom the money is payable. The bill can be drawn by the exporter payable to the drawer himself or his banker.

Endorser: The endorser is the person who has placed his signature on the back of bill signifying that he has obtained the title for the bill on his own account or on account of the original payee.

Endorsee: The endorsee is the person to whom the bill is endorsed. The endorsee can obtain the payment form the drawer.

A bill of exchange is generally used in international trade and aims at binding one party to pay a fixed amount of money to another party at a predestined future date. It is the most often used form of payment relating to local and international trade. For example, after shipping the goods, the exporter draws the bills to the importer or, most often, the bank acting on behalf of the importer, as agreed between the exporter and the importer. The exporter usually draws on behalf of his principal or that of its bank. Later, he supports the bill in favour of the bank. Exporter can collect your bank or requests for purchase invoices. In case of purchase of the invoice, the exporter receives export earnings immediately. In all cases, the exporter's bank...
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