October 23, 2009 GTSU Root Series 13

A bill of exchange is a written, unconditional order by one party (the drawer who is an exporter) to another (the drawee who is the confirming bank or the issuing bank) to pay a certain sum, either immediately (the sight bill) or on a fixed date (the usance bill), for payment of goods and/or services received. The drawee accepts the bill by signing it, thus converting it into a postdated check and a binding contract. It is also called a draft but, while all drafts are negotiable instruments, only 'to order' bills of exchange can be negotiated. According to the 1930 'Convention Providing A Uniform Law For Bills of Exchange and Promissory Notes' held in Geneva (also called Geneva Convention) a BOE contains: (1) The term 'bill of exchange' inserted in the body of the instrument and expressed in the language employed in drawing up the instrument. (2) An unconditional order to pay a determinate sum of money. (3) The name of the person who is to pay (drawee). (4) A statement of the time of payment. (5) A statement of the place where payment is to be made. (6) The name of the person to whom or to whose order payment is to be made. (7) A statement of the date and of the place where the bill is issued. (8) The signature of the person who issues the bill (drawer). BOE is the most often used form of payment in local and international trade, and has a long history-as long as that of writing (which was invented by accountants for recording trade transactions) going back over 5,000 years. Specimen A Reference No: 123 09, 2009 For USD64,430.00 At sight please pay this bill of exchange to BNP Paribas, Tel Aviv or order the sum of USD Sixty four thousand four hundred and thirty + 00/100 for Tokyo, October

the value received Drawn under documentary credit no:393MLC357409 dated September 15, 2009 of ICICI Bank Ltd, Backbay Branch, Mumbai 400020. To, ICICI Bank Limited Backbay Branch, Churchgate Mumbai - 400 020 Shipment Date: September 30, 2009 For ECI Telecom Limited Authorized Signatory Specimen B Reference No: 123 09, 2009 For USD57,160.80 At 365 days from shipment date of this First Bill of Exchange (Second being unpaid), please pay to Sumitomo Mitsui Banking Corporation or order the sum of U.S. Dollars Fifty seven thousand one hundred sixty and cents eighty only for the value received and charge the same to account of Tata Teleservices Ltd, A.E, and F Blocks, Voltas Premises, T.B Kadam Marg, Chinchpokli, Mumbai 400 033, India. Drawn under documentary credit no:393MLC208009 dated August 10, 2009 of ICICI Bank Ltd, Backbay Branch, Mumbai 400020. To, ICICI Bank Limited Backbay Branch, Churchgate Mumbai - 400 020 Shipment Date: September 30, 2009 For NEC Corporation Authorized Signatory Tokyo, October

The Bill of Exchange must conform exactly with the terms of the Letter of Credit, with the sum specified not exceeding the amount of the Letter of Credit. Unless the Documentary Letter of Credit stipulates that Bills of Exchange are required to be in duplicate, a single (sola) Bill of Exchange will be acceptable. First of Exchange (Second Unpaid) and Second of Exchange (First Unpaid) In practice, it is not uncommon that two drafts are drawn on the drawee bank in a letter of credit to ensure that at least one draft reaches the drawee when they are dispatched separately. The issuance of more than one draft in a letter of credit follows the same logic as in the issuance of bill of lading in more than one original. Bill of Exchange forms may be purchased from printers or stationers, or they may be drawn on a companys notepaper or even a blank sheet of paper. When being presented for payment, the Bill of Exchange must be correctly endorsed by the payee. From the above two specimens of the Bill of Exchange, please identify the following 1. 2. 3. 4. 5. Sight or Usance Drawee Drawer Payee The applicant name for the LC (if available on the BOE)

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