Bill of Exchange - Kinds of Bill


INTRODUCTION: A bill of exchange is a credit instrument. Basically it is an unconditional written order of creditor (maker) for a debtor to pay either to him, or to his order, or to the holder an amount written on the bill. According to negotiable instrument act 1882

DEFINITION: “Bill of exchange is a credit instrument in writing containing an unconditional order, signed by the maker directing a certain person to pay on demand or at a fixed or determinable future time, a certain sum in money to pay him, or to his order, or to the holder of the instrument.”

Rs. 20000 Karachi

5th December 2001 On demand pay Mr. Ahmed Wahid or order the sum of Rupees twenty thousand for value received.


(Signature of Mr. Ahmed Imran  Across the stamp)

THE DRAWER (CREDITOR): The person who draws the bill and puts his signature on it is known as the drawer of the bill, Also known as “MAKER” of the bill. Basically he is creditor (receiver of the money)

THE DRAWEE (DEBTOR): The person in whose name the bill is drawn is called as the drawee of the bill. Basically he is debtor as a buyer, or importer of the goods.

THE PAYEE: The person who receives the amount mentioned in the bill known as payee of the bill. The payee may be drawer himself or some body else.

THE ACCEPTOR: The person who accepts the bill is known as the acceptor of the bill. Usually the drawee accepts the bill by signing it. But sometimes, a third party may also accept the bill on behalf of the drawee.

THE HOLDER: The person who physically possesses the bill known as holder. He legally enjoys the right to possess it.

THE ENDORSER: The person who transfer the bill to another person known as endorser. The Endorser may be creditor or holder.

THE ENDORSEE: It is a party to whom the bill is endorsed. He is the creditor of the endorser. BILL 0F EXCHANGE (KINDS) 1. KINDS OF BILLS BY PLACE

INLAND BILLS: Inland bills mean the bill, which is drawn, and payable within the same country. For example the bill which is drawn in Pakistan and will also be paid in Pakistan is termed as an inland bill.

FOREIGN BILLS: The bill, which is drawn in one country and accepted & payable in another country, is known as a Foreign Bill.


DEMAND OR SIGHT BILL: The bill which is payable on demand or on presentation or at sight is known as demand bill.

• TIME BILL: The bill, which is payable at a fixed or a determinable in future time, is known as time bill.


• DOCUMENTARY BILL: Such bills carry with them documents like Bill of leading. Invoice, insurance policy is known as a Documentary bill.

• NON DOCUMENTARY BILL: when the bill is drawn and accepted with out being attached with the documents of exports. Such bills are known as non-documentary bills.


• BEARER BILL: These bills are payable to any person who bears or carries them. There are no restrictions that should get the money.

• ORDER BILL: The payment of the bill is restricted to the person whose name has been mentioned in the bill. -----------------------------------------X---------------------------------X---------------------------------------

ACCEPTANCE The seller of goods draws a bill on the buyer who receives, accepts and signs it. This accepting and signing of the bill by the drawee is known as acceptance. Generally the bill is attached with exporting documents including railway receipt, insurance receipt, bill of lading etc. The bill becomes a legal and negotiable instrument after this acceptance. It is then sent back to the drawer. In modern practice, the acceptance is not processed by the drawee. It is rather accomplished by the banker in the country of the drawer on behalf of the drawee.

DISHONOR OF THE BILL When the bill of exchange is not accepted or not paid on maturity the bill is said to have been dishonored. From the above it is clear that the bill is dishonored on two accounts. DISHONOR BY NON – ACCEPTANCE: When the drawee refuses to accept the bill, it stands to be dishonored. The dishonor by non – acceptance may have the following reasons:

• When the drawee is not entitled to accept it.

• When the drawee is a fake person.

• When the drawee disappears.

2. DISHONOR BY NON – PAYMENT: Another reason for the dishonor of a bill is its non – payment at maturity. The drawee may refuse to make the payment of the bill when it is presented at maturity; this refusal gives rise to dishonor by nonpayment.

NOTING AND PROTESTING When the bill is dishonored, the holder lodges his complaint with the notary public. The whole process of taking up the matter with it is known as noting and protesting.

NOTING: The notary public is notified by the holder of the dishonor of the bill by non- acceptance or nonpayment. This process is known as noting. This noting is entered in the register of the notary public which becomes a confirmed proof that the bill has been dishonored. Before noting is registered.The notary public requires necessary supporting evidence of dishonor. The notary public receives a fee, known as noting charges, for rendering this service. Late, these charges are recovered by the holder from the person responsible for dishonor. The noting carries the following information:

1. Dishonor of the bill 
2. Date of dishonor 
3. Reasons for the dishonor 
3. Noting charges 
4. Signature and seal of the notary public.

PROTESTING: Protesting is the written affirmation by the notary public of the dishonor of the bill.The certificate issued to this effect to the holder is known as a protest. The protest has the following contents:

1. The dishonored bill or its attested photocopy. 
2.Reason for the dishonor 
3. Date of the dishonor 
4.Signature and seal of the notary public. 
5. The names of the holder and the person responsible for the dishonor

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