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September 23, 2019 8:55 pm by admin

Bill of Exchange

International Bill Of Exchange

The bill of exchange is a document within which  one party ( the drawer) gives the order to another (the drawee) to pay unconditionally a sum of money at  a given place and date, for goods or services received.

By accepting and signing the terms of this document, the drawee  implicitly converts it to kind a post-dated check and a de facto contract .

The bill of exchange is regulated by the “1930 Geneva Convention on bills of exchange and promissory notes”, a legal framework which makes this instrument accepted worldwide  for domestic and cross-border transactions. In addition, the fact that the English common law legal system and the American Uniform commercial Code are aligned with the Geneva Convention, makes the bill of exchange a widespread payment tool  in international trade.

Given that the bill of exchange is also negotiable, it can be discounted, transferred to another party or used as a guaranty.

In a nutshell, a bill of exchange can be used as a :

  • Payment method
  • Credit Instrument (when payment is deferred)
  • Commercial-title
  • A debt-asset (negotiable)    

Nonetheless, in order to be valid, the bill of exchange must rigorously comply with the formalism required by the regulation (Geneva Convention).

The main rules that need to be respected are the following:

1-The term bill of  exchange

The term bill of exchange must clearly appear as the title of the document as well as in the body of the document, which is to say in a sentence written by the drawer.

This 2 conditions are mandatory.

Language used

Any language can be used but only one language must be used throughout the document. (mandatory)

2-An unconditional order to pay a sum of money

The order is unconditional and therefore its application can neither be subordinated to the completion of any action, nor to the occurrence of any event.

In Addition, the amount must be written in both numbers and letters. In case of discrepancies, this is the amount written in letters that will be considered. When the amount is stated several times in letters and numbers, the lowest amount will hold. Needless to say that, the best way to avoid this potential kind of  hassle is to carefully check that amounts match.

3-The name of the person who is to pay (drawee)

This condition refers to the full name of the drawee which is, in other words, the debtor to whom the order to pay is given. While only the Trade name (or personal name for sole entrepreneur for instance) is mandatory , good practice consists in providing company address , company registration number etc..

4-Statement of the time of payment

The Bill of exchange recognizes 4 payment modalities which are:

At sight / or at presentation

As soon as the draft has been accepted  by the drawee, it could be presented for payment at any time by the creditor or the bearer.

At a fixed period after sight

Here, the bill could be presented for payment based on the mentioned period (2 months for ex) which start from the date of acceptance.

At a fixed period after date

Here again, the bill could be presented for payment based on the mentioned period (3 month for ex), but in this case this is the date of the drawing which constitutes the start.

At a fixed date

In this case a specific date must  be stated (the 6th of December 2019 for example).It must be pointed out that the date must be written in full which is to say that the day, month and year must entirely be determined.

!!! Be aware that in the case of absence of payment modality, the bill of exchange is deemed to be payable at sight. Furthermore any successive payment such as payment by instalment are deemed invalid.

In short, any payment modality outside the 4 types which have been developed above are deemed null and void.

5-A statement of the place where payment is to be made

The details of the bank that will fulfill the payment are usually provided here or alternatively, the address of the drawee (debtor) can be chosen.

6-The name of the person to whom or to whose order payment is to be made

This article is alluding to the name of the beneficiary which is the drawer. Please note that the bearer cannot be designated as the beneficiary at this stage. The possibility to transfer the ownership of the draft to a given beneficiary or to “the bearer” can only happen when the acceptance of the drawee has been materialised by his signature. In short , the name of the first beneficiary or drawer must be clearly specified in the draft that will be signed by the debtor (the drawee)

7-A statement of the date and place where the bill is issued

The place where the draft has been issued by the (drawer) must be mentioned as well as the date of issuance. Please note that the date of the draft issuance must precede the date of payment for being valid.

8-The signature of the person who issues the bill (drawer).

The signature of the drawer is a central component of the draft and as such, it must clearly appear on the document

Important !!!

If the requirements developed above are not met, the bill of exchanged is deemed invalid.

However, there is a  margin of tolerance in  3 specific cases:

1-Absence of time of payment

As already mentioned, if no time of payment is provided, the bill of exchanged is deemed to be payable at sight

2-Place of payment Missing

If the place of payment has not been explicitly provided, the address beside the drawer’s name or the domicile of the drawer is deemed to be place where the payment should take place

3-Absence of place of Issuance:

Again, if the place of issuance of the Bill of exchange is missing , the place beside the drawer’s name or the domicile of the drawer is considered to be the place of issuance.

Beyond those 3 exceptions, the Bill of Exchange is Invalid !!!!!!

Partial Payment :

Partial payment is allowed provided that a receipt is issued and that, a mention of such payment is made on the bill of exchange (art39).


The drawee accepts the bill by writing the term “accepted ”  on the face of the document and by signing it. Note that the signature only suffice for proving acceptation.

With the payment at sight  for which payment time depends on acceptation, the acceptation date must imperatively be specified beside the signature .


      Endorsement Process

Endorsement consists in transferring the ownership of the bill of exchange or a promissory note from one party to another. The process is pretty straightforward and unfolds as follows:

The “endorser” who is the owner of the draft, transfers the property of the bill to the “endorsee” by writing a declaration on the back of the document  or on a slip affixed where he gives order to the payee (beneficiary) to pay.

Endorsement in Blank

If the endorsement does not mention a specific endorsee, it is considered to be an endorsement in blank which means that the title will become a kind of blank check:

Indeed, in this case the Holder of the commercial title can either:

-Fill it up with his name or the name of anyone else

-Re-endorse the bill to someone in particular or just not mentioning any new endorsee

-Transferring the title by giving it to another person without mentioning anything on the bill.

In this last case, there is an unwritten transfer of property through tradition where the commercial title change ownership by passing from hand to hand.

When an endorsement in blank is made, it must only contain the following:

-A sentence which states that the owner transfers the right attached to the bill (‘pay to’, ’in favor of’, etc..)

-The signature of the endorser

Please note that while the specification of the endorsee is optional , endorser’s signature is mandatory and must be imperatively written on the back of the document. This requirement prevents any confusion with other signatures which are on the front of the bill.

Overall, the endorsement in blank facilitates the circulation of the title which will become implicitly a substitute for money. The other advantage is that since the successive possessors’ names do not appear on the title , they bear no responsibility towards subsequent endorsee in case of solvability issue.

Complete endorsement

In this case, every party involved are clearly identified. In other words, both the name and surname of the endorser (s) and the endorsee(s) appear on the back of the title in the sentence which constitutes the transfer of ownership.


Endorsement “at the bearer”

Last but not the least, the bill of exchange can be endorsed “at the bearer”. In this case, the endorsee is not identified on the bill and any person who holds the title becomes the legitimate owner of the Bill.

In some way, it works as if it was an endorsement in blank although here the mention ‘at the bearer’ makes it clear that the owner could be anyone which has the bill in his possession.

Put differently, while with the endorsement in blank , endorsee’s identity is left in blank, here the endorsee is designated as “the bearer” of the title.

Like the endorsement in blank the “at the bearer” bill can be endorsed through simple tradition meaning that he can be transmitted from hand to hand. 


Partial endorsement

!!! Please note that an endorsement can only be made in full and thus, partial endorsement is considered to be invalid.

Liability and payment default

In case of solvency issue of the drawee, the endorser remains liable not only towards one endorsee but to all the subsequent endorsees that appear on the title.

By engaging in the endorsement process, the endorsers become accountable in solidarity towards the subsequent endorsees who are entitled to address their claims to any endorser mentioned in the bill.

However, the endorser can prohibit any subsequent endorsement by specifying it in the bill (clause). By doing so, he will no longer be held accountable towards every subsequent endorsees.

This rule applies also to each subsequent endorsers unless each of them made clear that they exonerate themselves from the responsibility to pay in case of non-payment by the drawee (debtor).


Aval consists in guaranteeing the payment of the whole or partial amount of the bill of exchange(or promissory note). This guaranty can be given by a third party such as a the bank’s debtor for instance as well as  by anyone including the party involved in the bill of exchange (endorser, drawer, etc….)

Aval is given with the words “good for aval” (or words which have equivalents sense) and a signature of the “aval” giver.

The party for which the “aval” is given must be specified otherwise the aval is deemed to be given to the drawer.

The guarantor who gives the aval becomes as much liable as the person for whom he gives his aval.

Needless to say that the aval represents the best protection against non-payment especially if the “aval” is given by Bank of good reputation.


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