BRF 2010 (Solved)

Bills of Exchange and its essentials.
                As per Section 5 a “bill of exchange” is “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”
The essentials of a Bill of Exchange are:-
a)      Number of parties:  A bill of exchange has 3 parties:
a.       the drawer, who draws the bill of exchange
b.      the drawee, which has to make the payment
c.       the payee, who is entitled to the payment.  Sometimes the drawer and the payee can be one and the same person.
b)      Must be writing: The Bill of Exchange must be in writing.
c)       Express order to pay: This is the essence of a bill of exchange. There must be an ‘order by the drawer to the drawee to pay’. The order must be a command and not an excessive request.
d)      Order must be unconditional: The order to pay must be unconditional. In other words the happening of the condition must be certain.
e)      Order to pay money only:  Just as a promissory note, the instrument must be for money only.
f)       Sum payable to be certain: The amount payable must be certain. There should be no ambiguity in the amount to be paid through the Bill of Exchange.
g)      Must be signed:  The instrument is complete only when it is signed by the drawer and the drawee.
h)      Must bear the stamp:  A Bill of Exchange must be properly stamped in accordance with the Indian Stamp Act, 1899 and must also be properly cancelled.
i)        Other formalities: Formalities such as date, place, consideration, etc. are usually found in a Bill of Exchange.
j)        Requisites of a contract to be complied with:  All requisites of a valid contract like capacity to contract, consideration, free consent, lawful object must be present.

Difference between ‘Bill of Exchange’ and ‘Cheque’.
Bill of Exchange
a)      Drawee
Only a banker can be a drawee.
Anyone can be drawee, including a banker.
b)      Acceptance
A cheque requires no acceptance.
It must be presented for acceptance. Drawee is liable only after his acceptance.
c)       Payment
Payable on demand without any days of grace.
A bill is normally entitled to three days of grace after maturity, unless payable on demand.
d)      Presentment
If not presented to the banker for payment, it does not discharge the drawer unless he suffers injury or damages.
Drawer is discharged, if bill is not presented for payment to the acceptor.
e)      Notice
In case of dishonour no notice of dishonour is necessary
Notice of dishonour is to be given to all the parties liable to pay.
f)       Crossing
A cheque may be crossed.
Bill can never be crossed.
g)      Stamp
Cheque requires no stamp.
Bill has to be properly stamped.
h)      Countermanding payment
Payment of cheque may be countermanded by the drawer.
Payment of bill of exchange cannot be countermanded by the drawer.
i)        Noting and protesting
A cheque is not required to be noted or protested for dishonour.
A bill of exchange may be noted or protested for dishonour.
j)        Payable to bearer on demand
A cheque can be dawn payable to the bearer on demand.
A bill of exchange cannot be drawn payable to bearer on demand.