Meaning of Bill of Exchange

According to the Negotiable Instruments Act, 1881, 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 the order of — a certain person, or to the

bearer of the instrument.

The main features of a bill of exchange are:

• It must be in writing.
• It is an order to make payment.
• The order to pay is unconditional.
• The maker of the bill must sign it.
• The amount payable must be certain.
• The date of payment must also be certain.
• It must be payable to a certain person.
• The amount is payable either on demand or on the expiry of a fixed period.
• It must be stamped as required by law.

A bill of exchange is generally drawn by the creditor upon the debtor. It has to be

accepted by the drawee (the debtor) or by someone on the drawee's behalf; until it is

accepted it is merely a draft.

For example, Amit sells goods to Rohit on credit for ₹10,000 for three months. To secure …