Theory question 103
Purchase and Sale of GoodsCommerce 2 (answer any five questions)
(a) Define a bill of exchange.
(b) State six essential features of a bill of exchange.
(c) List the parties to a bill of exchange.
Show the model answer
(a) A bill of exchange is an unconditional order in writing, addressed by one person (the drawer) to another (the drawee), signed by the drawer, requiring the drawee to pay on demand or at a fixed or determinable future time a certain sum of money to, or to the order of, a specified person or to bearer.
(b) Any six: it is in writing; it is an unconditional order; it is signed by the drawer; it is addressed to a named drawee; it states a definite sum of money; payable on demand or at a fixed future date (tenor, e.g. 90 days); payable to a named person, his order or bearer; it must be accepted by the drawee (signature across it); it is negotiable – transferable by endorsement; it is dated; it bears stamp duty; three days of grace (for time bills).
(c) Parties: drawer; drawee (acceptor); payee; also endorser and endorsee/holder (holder in due course).
Learn the standard definition and give six features.