Bills of exchange—structure and parties
Produced in partnership with Ed Bellamy, Marta Bishop and Jad Hussain of Paul Hastings (Europe) LLP

The following Banking & Finance practice note produced in partnership with Ed Bellamy, Marta Bishop and Jad Hussain of Paul Hastings (Europe) LLP provides comprehensive and up to date legal information covering:

  • Bills of exchange—structure and parties
  • Parties to a typical bill of exchange
  • The drawer
  • The drawee
  • The payee
  • Types of bills of exchange for trade finance
  • Sight bill (or sight draft)
  • Time bill
  • Accommodation bill (or windbill)
  • Bill of exchange structure diagram
  • More...

Bills of exchange—structure and parties

Bills of exchange are negotiable instruments that represent an unconditional promise by one party to pay another party, in accordance with the terms of that instrument. They are often used in the context of trade finance where, for one reason or another, a party does not want to make immediate settlement of its account. The Bills of Exchange Act 1882 (BEA 1882) sets out in detail the requirements for the form of a bill of exchange and accordingly should be consulted prior to any detailed consideration of a bill of exchange.

BEA 1882 provides that 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 the bearer.'

For more information, see Practice Note: Form of promissory notes and bills of exchange.

The key characteristics of bills of exchange are as follows:

  1. 'unconditional'—payment cannot be subject to any conditions or requirements whether set out in the instrument or referenced externally

  2. 'in money'—they are for payment in money and cannot include an agreement to perform any other acts

  3. 'sum certain'—the amount due cannot be qualified or contingent in

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