Bills of exchange and promissory notes

What are bills of exchange and promissory notes?

Bills of exchange and promissory notes are widely used in trade finance transactions.

A bill of exchange is an instrument that is used to transfer money from one person to another instead of the transfer of the actual money itself.

A promissory note is often used in similar trade finance situations to a bill of exchange, with the essential difference being that a bill of exchange is an order to pay (usually the drawer ordering the drawee to pay the payee), while a promissory note is a promise to pay (the maker of the note promising to pay the payee).

Bills of exchange and promissory notes are governed by the Bills of Exchange Act 1882 (BEA 1882).

For information on the form that bills of exchange and promissory notes are required to take under BEA 1882 and otherwise, see Practice Note: Form of bills of exchange and promissory notes.

Bills of exchange

Bills of exchange are negotiable instruments that represent an unconditional promise by one party to pay money to another party,

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