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Bills of Exchange

PostPosted: Sat May 23, 2009 10:43 am
by huntingross
We all research the things that are important and close to us, and leave other things to the side....perhaps until we're ready....etc etc.

I got myself into a twist with Bills of Exchange last night and having paid attention to other aspects in my recent journey, it is time for me to focus on this, and try and get one thread on the subject to help myself and others.

This stuff is out there, mostly what I'm doing is bringing it together and showing where the terminology is interchangeable.

The relevant Statute is the Bills of Exchange Act 1882

A Bill of Exchange is a Negotiable Instrument.

From the Act :

3. Bill of exchange defined. — (1) A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.

The best description I found of what a Bill of Exchange is :

bill of exchange n. a writing by a party (maker or drawer) ordering another (payor) to pay a certain amount to a third party (payee). It is the same as a draft. A bill of exchange drawn on a bank account is a "check."

A bill of exchange is defined to be an open letter of request from, and order by, one person on another, to pay a sum of money therein mentioned to a third person, on demand, or at a future time therein specified.

The person (A) writing the Bill is the person that wants to settle a debt for example.

He orders another party (B) to pay an amount of money "sum certain" to a third party (C) on demand or at a fixed future date.

A) Is the first party, the "maker" or "drawer".
B) Is the second party, the "payor" or "drawee".
C) Is the third party, the "payee" or holder or bearer.

The parties to a bill of exchange are :
The drawer, or he who makes the order;
The drawee, or the person to whom it is addressed;
The acceptor, or he who accepts the bill;
The payee, or the party to whom, or in whose favor the bill is made.
The indorser, is he who writes his name on the back of a bill;
The indorsee, is one to whom a bill is transferred by indorsement; and
The holder, is in general any one of the parties who is in possession of the bill, and entitled to receive the money therein mentioned.

A bill of exchange is distinguishable from a promissory note, since it does not contain a promise and the drawer does not expressly pledge to pay it. It is similar to a note, however, since it is payable either on demand or at a specific time.

The terms bill of exchange and draft are synonymous; however, the former is generally used in International Law, whereas the latter is used in the Uniform Commercial Code.

A bill of exchange drawn on a bank account is a "check." (Interesting spelling for those into word play - I would write cheque).

So I for example would write a cheque, in effect ordering the Bank to pay the "bearer or holder" or a specific named person a certain fixed amount of money "sum certain" either on demand or future fixed date.

However from the second quote above, the Bill can also be an open letter of request and order from (A) to (B) to pay (C).

This is why you can write "cash" on a cheque so that the "bearer or holder" can present the cheque for payment. This person may not be the person that you originally gave the cheque to. This may have been passed on in payment of a third party debt etc.


A signature on a Commercial Paper or document is an Indorsement (Endorsement)

An indorsement on a negotiable instrument, such as a check or a promissory note, has the effect of transferring all the rights represented by the instrument to another individual. The ordinary manner in which an individual endorses a check is by placing his or her signature on the back of it, but it is valid even if the signature is placed somewhere else, such as on a separate paper, known as an allonge, which provides a space for a signature.

endorsement (indorsement) n. 1) the act of the owner or payee signing his/her name to the back of a check, bill of exchange, or other negotiable instrument so as to make it payable to another or cashable by any person. An endorsement may be made after a specific direction ("pay to Dolly Madison" or "for deposit only"), called a qualified endorsement, or with no qualifying language, thereby making it payable to the holder, called a blank endorsement. There are also other forms of endorsement which may give credit or restrict the use of the check. 2) the act of pledging or committing support to a program, proposal, or candidate.


From the Act ;

Inchoate instruments.— 20. (1) Where a simple signature on a blank . . . F1 paper is delivered by the signer in order that it may be converted into a bill, it operates as a prima facie authority to fill it up as a complete bill for any amount . . . F1 , using the signature for that of the drawer, or the acceptor, or an indorser; and, in like manner, when a bill is wanting in any material particular, the person in possession of it has a prima facie authority to fill up the omission in any way he thinks fit.

Yes you read that right, If you deliver a signed blank piece of paper for the purpose of converting it to a Bill, you are authorising the person in possession of it to fill it out for any amount he thinks fit. Notice there is no direction given to the source of the remuneration (the drawee), the paper is blank, save for the signature.



When a bill is made payable to a fictitious person, and indorsed in the name of the fictitious payee, it is in effect a bill to bearer, and a bona fide holder, ignorant of that fact, may recover on it, against all prior parties, who were privy to the transaction. In a case where the drawer and payee were fictitious persons, the acceptor was held liable to a bona fide holder.

The form of the bill. The general requisites of a bill of exchange, are :
1. That it be in writing.
2. That it be for the payment of money, and not for the payment of merchandise.
3. That the money be payable at all events, not depending on any contingency, either with regard to the fund out of which payment is to be made, or the parties by or to whom payment is to be made.

The particular requisites of a bill of exchange. The several parts of a bill of exchange are :
(no particular form or set of words is necessary to be adopted. An order " to deliver money," or a promise that " A B shall receive money," or a promise " to be accountable" or " responsible" for it, have been severally held to be sufficient for a bill or note.)
1. That it be properly dated as to place
2. That it be properly dated as to the time of making. As the time a bill, becomes due is generally regulated by the time when it was made, the date of the instrument ought to be clearly expressed.
3. The superscription of the sum for which the bill is payable is not indispensable, but if it be not mentioned in the bill, the superscription will aid. the omission.
4. The time of payment ought to be expressed in the bill; if no time be mentioned, it is considered as payable on demand.
5. Although it is proper for the drawer to name the place of payment, either in the body or subscription of the bill, it is not essential; and it is the common practice for the drawer merely to write the address of the drawee, without pointing out any, place of payment; in such case the bill is considered payable, and to be presented at the residence of the drawee, where the bill was made, or to him personally any where. It is at the option of the drawer whether or not to prescribe a particular place of payment, and make the payment there part of the contract. The drawee, unless restricted by the drawer, may also fix a place of payment by his acceptance.
6. There must be an order or request to pay and that must be a matter of right, and not of favor. But it seems that civility in the terms of request cannot alter the legal effect of the instrument. "il vous plair a de payer," is, in France, the proper language of a bill. The word pay is not indispensable, for the word deliver is equally operative.
7. Foreign bills of exchange consist, generally, of several parts; a party who has engaged to deliver a foreign bill, is bound to deliver as many parts as may be requested. The several parts of a bill of exchange are called a set; each part should contain a condition that it shall be paid, provided the others remain unpaid. The whole set make but one bill.
8. The bill ought to specify to whom it is to be paid. When the name of the payee is in blank, and the bill has been negotiated by indorsement, the holder may fill the blank with his own name. It may, however, be drawn payable to bearer, and then it is assignable by delivery.
9. To make a bill negotiable, it must be made payable to order, or bearer, or there must be other operative and equivalent words of transfer. If, however, it is not intended to make the bill negotiable, these words need not be inserted, and the instrument will, nevertheless, be valid as a bill of exchange. In France, a bill must be made payable to order.
10. The sum for which the bill is drawn, must be clearly expressed in the body of it, in writing at length. The sum must be fixed and certain, and not contingent. And it may be in the money of any country. Payment of part of the bill, the residue being unpaid, cannot be indorsed. The, contract is indivisible, and the acceptor would thereby be compelled to make two payments instead of one. But when part of a bill has been paid the residue may be assigned, since then it becomes a contract for the residue only.
11. It is usual to insert the words, value received, but it is implied that every bill and indorsement has been made for value received, as much as if it had been expressed in Totidem Verbis [In so many words].
12. It is usual, when
The drawer is debtor to the drawee, to insert in the bill these words "and put it to my account" but
The drawee is debtor to the drawer, to insert in the bill these words "and put it to your account" and
Where a third person is debtor to the drawee, it may be expressed thus "and put it to the account of A B"
but it is altogether unnecessary to insert any of these words.
13. When the drawer is desirous to inform the drawee that he has drawn a bill, he inserts in it the words, "as per advice;" but when he wishes the bill paid without any advice from him, he writes, "without further advice." In the former case the drawee is not authorized to pay the bill till he has received the advice; in the latter he may pay before he has received advice.
14. The drawee must either subscribe the bill, or, it seems, his name may be simply inserted in the body of the instrument.
15. The bill being a letter of request from the maker to a third person, should be addressed to that person by the Christian name and surname, or by the full style of their firm.
16. The place of payment should be stated in the bill.
17. As a matter of precaution, the drawer of a foreign bin may, in order to prevent expenses, require the holder to apply to a third person, named in the bill for that purpose, when the drawee refuses to accept the bill. This requisition is usually in these words, placed in a corner, under the drawee's address: " Au besoin chez Messrs. - at -," in other words, ((In case of need apply to Messrs. at -. "
18. The drawer may also add a request or direction, that in case the bill should not be honored by the drawee, it shall be returned without protest or without expense, by subscribing the words, " retour sans protet," or " sans frais;" in this case the omission of the holder to protest, having been induced by the drawer, he, and perhaps the indorsers, cannot resist the payment on that account, and thus the expense is avoided.
19. The drawer may also limit the amount of damages, by making a memorandum on the bill, that they shall be a definite sum; as, for example: "In case of non-acceptance or non-payment, re-exchange and expenses not to, exceed dollars."

Re: Bills of Exchange

PostPosted: Sat May 23, 2009 7:24 pm
by Veronica
I'm not sure if it went right past me or not.

It looked to me as though it describes precisely the mechanism I proposed for how "money" is created, from a Loan Application being considered to be a cheque.

Re: Bills of Exchange

PostPosted: Sat May 23, 2009 8:34 pm
by huntingross
V jumped the gun a little here, I wanted to reserve that slot for updates so the thread was tight....the best laid plans and all.

But, my "reservation comment" was going to be the same.

Someone sends you a Bill, send them a signed blank piece of paper and a copy of S20 (1) and tell them to convert it into a Bill in anyway they see fit.

My confusion now lies with why they send us a Bill. It doesn't fit with my new understanding of what a Bill is.....they do not issue a negotiable instrument, signed and dated with a "sum certain", with a draftee address.

Anyhoo, if someone would like to offer an explanation of that, this thread is open for business.

Re: Bills of Exchange

PostPosted: Sat May 23, 2009 8:49 pm
by Veronica
I have absolutely no problems with deleting my post (you can do that), and taking over that slot ... and this slot as well.

"Do what comes naturally"

Re: Bills of Exchange

PostPosted: Sat May 23, 2009 9:05 pm
by huntingross
No V, life isn't perfect, and I choose not to make it so....your post was going to be my point to open the thread up for debate anyway.

Re: Bills of Exchange

PostPosted: Sun May 24, 2009 1:15 am
by huntingross
So, the dilemma seems to be, the so called Bills we are sent through the post are not fitting with the definition of a Bill according to the Act.

Well our Canadian cousins are as usual ahead of us and have discussed this at length, their Bill of Exchange Act is the same as our (or so it seems) the numbers are just jumbled.

I credit "mrl" for providing some clarity to this :

Bill of exchange defined. 3(1)
A bill of exchange is an unconditional order in writing.
It is -
Addressed by one person to another
It is -
Signed by the person giving it
It requires -
The person to whom it is addressed to
Pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.

a) an unqualified order to pay, coupled with an indication of a particular fund out of which the drawee is to reimburse himself or a particular account to be debited with the amount, or

b) an unqualified order to pay, coupled with a statement of the transaction that gives rise to the bill,

is unconditional.

So an order to pay coupled with a statement is an unconditional order in writing, therefore is a Bill of Exchange.

So it must be adressed by one person to another,

It must be signed by the person giving it

It requires the person to whom it is adressed to pay on demand a sum certain in money to a specified person.

This is all very abstract. How about the specifics, a telephone 'bill'.

It is from BT (drafter) addressed to ME (draftee)
It is NOT signed by BT
It requires ME to pay a sum certain in money to BT (payee)

All seems straight forward except they haven't signed it or used a company seal in lieu of a signature....whoops.

Now our Canadian friends are talking about getting the 'real' Bill, the one that the statement "gave rise to"....but I think that bill would say the same thing, and we would still be the draftee.

Should we invoke S20(1) and send them a signed blank piece of paper and give them the authority to fill it in.

I suspect they would use my bank account details which they will already have and use with my authority....I could exclude that from their authority, but they would just ask me which account.

Again the Canadians are talking about 'closed accounts' and writing more than 31 day post dated cheques against it as set-off...

The story continues.

Re: Bills of Exchange

PostPosted: Sun May 24, 2009 9:18 am
by huntingross
I've just waded through alot of stuff on that Canadian thread and will dump it here un-digested because I need to go out soon.

I may edit it later or just loose it depending if it makes more sense or not.

don't issue A4V but a money order.

'On the back stamps' that people have been using to make their checks non-taxable, it says "To be deposited as credit on account OR in exchange for bank notes ". So here we are either using credit, or bank notes as exchange for credit. But we aren't using bank notes as cash so to speak. Maybe everything has to be done in exchange, and not as one way cash

If an agent for the car company wrote up a bill, he would have have to make us a firm offer for the car that is owned by the queen through trust. He would draw up the bill so he is the drawer. Our 'person' (through us) accepts it so it is the drawee. The company/Queen has subrogated the rights and defenses of the bill by bonding the agent, so it is the payee. Now the question becomes, who is the payor? Our public 'person'... or on our private side. We decide.

Re: Bills of Exchange

PostPosted: Tue Jun 02, 2009 6:19 pm
by huntingross
OK, I need someone to seriously sanity check seems a little TOO easy.

An order to pay and a statement = a Bill of Exchange.

A blank piece of paper, signed and delivered is a bill of exchange that can be filled in as the holder see's fit. A company stamp is effective as a signature.

I'm looking at an MBNA bill of exchange...It is a statement, an order to pay, and a remittance slip.

I would normally fill it in as I see fit....I would date it, sign it and attach a cheque made out to the sum I filled in on the remittance slip.

It has my name and address on it, it has their bank details on it and a blank sum box, it has a blank date and a blank 'paid in by' box.

Now I, like most everyone on the planet looks at my details on there and say that is the account it is coming out of....but infact there are no account details on there of mine....the account details are they are the 'draftee'...the person to whom it is adressed.....which makes my details the 'payee'....the person in whose favour it is made.

As it is incomplete, I have the authority to fill it in (we already know this because we do it all the time) I date it and sign it....'paid in by'....effectively endorsing it, as it is already signed by the MBNA company stamp (their logo)

So if we write 'pay cash' or 'credit my accout' and sign it, that is an instruction by endorsement to me the endorsee.

So we fill in the sum box for the total amount on our card, and deposit that in our account and then write a cheque to MBNA for what ever sum we like upto the outstanding balance.

Personally, I'd pay the minimum and let them do it again the next month and repeat the process.

Please discuss and tell me where this has gone belly up....

(oh...and forgot to mention...the significance of this is no A4V is required or trying to link to a difficult to prove Birth Bond.)

Re: Bills of Exchange

PostPosted: Wed Jun 03, 2009 11:39 am
by huntingross
Any takers ??

Re: Bills of Exchange

PostPosted: Wed Jun 03, 2009 8:53 pm
by huntingross
Ha....I'm going to claim estoppel by acquiesence on this one if somebody doesn't dip their toe in the water.

If we can simply take a 'slip' or 'voucher' (depending who's Bill you read) and pay it into our account and write a cheque to cancel the card debt (electricity / gas / water) etc.....this has huge implications for everyone.

Delusionally yours