Term of the Bill, Days of Grace and Due Date (Date of Maturity)

Three closely related terms decide exactly when a bill of exchange must be paid, and getting the due date right is the starting point of every accounting entry in this chapter.

Term of the bill (tenor). The period for which the bill is drawn — expressed either in months (e.g. 'three months after date') or in days (e.g. '90 days after date') — counted from the date the bill is drawn ('after date') or from the date it is presented for acceptance ('after sight'). A bill may also be payable 'on demand', 'at sight' or 'on presentment', in which case it is payable immediately on presentation, with no term to count at all.

Days of grace. Under Section 22 of the Negotiable Instruments Act, 1881, every bill of exchange (and promissory note) that is not payable on demand is entitled to three days of grace — three additional days, beyond the nominal period stated on the bill, before payment can legally be demanded. A bill payable on demand/at sight/on presentment gets no days of grace.

Computing the due date (date of maturity):

1. Find the nominal due date — the date the stated term ends, counted from the date of the bill (or date of acceptance, for an 'after sight' bill). If the term is in months, the nominal due date falls on the corresponding date in the month the term ends (e.g. a bill dated 15th January for 'three months after date' has a nominal due date of 15th April), regardless of the number of days in each intervening month. If the term is in days, count the exact number of days, excluding the date of the bill but including the last day.
2. Add three days of grace to the nominal due date to get the actual due date. …