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What are the advantages of a bill of exchange over other methods of payment?

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  • Essay length: 2550 words
  • Submitted: 22/12/2003
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University Degree Contract Law

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What are the advantages of a bill of exchange over other methods of payment?

The definition of a bill of exchange is set out in Section 3 of the Bills of Exchange Act 1882:

(1) A bill of exchange is an unconditional order in writing, addressed by one person to another...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 bearer.

In effect the bill works in the following way; Person A, the drawer of the bill, draws a bill on B, the drawee, ordering him to pay money at some point to C, the holder of the bill (C can also be referred to as the payee or the indorsee). There are two kinds of bill: a bearer bill and an order bill. The former instructs the drawee to pay the person in possession of the bill. The latter instructs him to pay the person whose name it is indorsed to.1 A bill can also be payable on demand or by acceptance. An example of the former of these

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