Define a bill of exchange what are the advantage and featurees of abill of exchange?
Answers
Answer :-
Definition -
According to Negotiable Instrument
Act 1881 . A bill of exchange is defined as an instrument which is in written form containing unconditional order , signed by the maker , directing a certain person to pay a certain amount of money only to or to the order of certain person or to the bearer of the instrument .
Features -
1) The instrument must be in written.
2) It is an order to make the payment.
3) The drawer must sing the bill.
4) The payment which is to be made should be certain .
5) The date at which the payment is to be made should be certain .
6) The person to whom payment is to be made is certain .
7) The amount mentioned in the bills of exchange is payable either on demand or on the expiry of the fixed period of time .
8) It must be stamped as per the requirement of the law.
Detail in explanation
Explanation:
Under Section 5 of Negotiable Instruments Act 1881 Boll of exchange is drawn by a person to pay certain money to the holder of bill of exchange the person ordered must accept it then it becomes a bill of exchange
Feature of bill of exchange
it is in written form
It is drawn by the maker/drawer.
it is must accepted by the drawee.
it specifies the date
it specifies the certain amount to the person named in the bill
Advantage of bill of exchange
1. we can done credit sales without any difficulty with the help of it
2. we can Retain it
3. we can discount it with the bank and get payment before time
4. If bill bounced then one party take legal action towards another
5 it is valid evidence for both the party , signed and stamped
example: A made credit sale to B. B don't give money to A
B signed on a paper piece called Bill of exchange & agreed to paid the money with certain period.
If we talk about today's date A have only a piece of document and have 3 option.
1 Retain in Business.
2. Discounted with Bank
3. endorsement
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