Honour and Dishonour of a Bill

A bill is said to be honoured when the drawee (acceptor) pays the full amount to the holder on the due date, on presentment of the bill. Honour is the normal, expected end of a bill's life: the holder presents the bill (in practice, often through the holder's own bank acting as a collecting agent) and the drawee's bank pays the amount out of the drawee's account.

A bill is dishonoured when the drawee refuses or is unable to pay the amount on the due date — commonly because of insolvency or a genuine cash-flow shortage, though occasionally over a real dispute about the underlying transaction. Once dishonoured, the holder's claim reverts to being an ordinary claim against the drawee (and, because endorsement carries a chain of liability, potentially against every earlier endorser too) for the bill amount plus any expenses the holder incurred in trying to recover it. …