Term of the Bill, Days of Grace and Due Date

The 'term' of a bill is the period between the date it is drawn and the date it is expressed to fall due — for example, three months after date, or 60 days after sight. Indian mercantile custom, recognised under the Negotiable Instruments Act, 1881, adds three extra days — called days of grace — to the nominal due date arrived at from the term, except for bills payable on demand or at sight, which carry no days of grace and are payable immediately on presentment.

The date obtained after adding the days of grace is called the date of maturity or due date — the date on which the drawee is legally required to pay.

Two further adjustments apply once the date of maturity has been calculated:

• If the date of maturity falls on a day that is a public holiday known in advance (a scheduled/fixed holiday such as a national festival), the bill matures on the preceding business day.
• If the date of maturity falls on a day that turns out to be an emergency (unforeseen) holiday, the bill matures on the next business day instead.

When the term is expressed in months, the period is counted in calendar months (irrespective of the actual number of days in each month) up to the corresponding date in the due month; when the term is expressed in days, every day is counted, excluding the date of the bill itself but including the last day of the stated period, before the three days of grace are added.

Worked illustration — calculating a due date