bill of exchange

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bill of exchange:

see draftdraft,
in banking, order by one party to another party to pay a stated sum to the person or firm in whose favor the draft is made. It is similar in form to the ordinary bank check. Often the drawer and the drawee of a draft are the same person.
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Bill of Exchange

 

draft, a type of commercial paper; it represents a monetary obligation in a form strictly established by law. It is an unconditional and undisputed debt document. In international trade and also in the domestic circulation of the capitalist countries, the bill of exchange is used as one of the most important means for formalizing credit and account relationships; it performs various functions differing in character and is used, for example, as a payment document that is transferred in an established manner by one person to another in place of monetary payment. In addition it acts as an instrument of credit and is also used for collecting (receiving) a debt.

Two types of bills of exchange are distinguished: simple and transferable. The simple bill of exchange, or promissory note, is an unconditional obligation by the person who has issued it to pay the sum of money designated on demand or at a certain time given in the note to a person or to his order (that is, to another person indicated by him). With the transferable bill of exchange, the payer is usually not the drawer of the note but rather a third party, the acceptor who by the act of acceptance takes on the unconditional obligation to pay. Thus the transferable note is in form a document that contains an unconditional order by the note drawer to the payer (acceptor) to pay a certain monetary sum to the person indicated in the note or his order, when the note is presented or at a certain time.

Because the bill of exchange acts as an instrument replacing cash money, during the process of the circulation of the bill of exchange other persons may be joined to the note drawer and acceptor, such as endorsers who transfer notes by endorsement and guarantors who guarantee payment on the bill for some other person who is responsible for the bill. A common practice in international transactions is the so-called discounting of notes, whereby the holder of a note may present it to a bank before the time of payment and receive the amount indicated in it (minus a discounting rate). When the time of payment arrives, the bank itself submits the note for payment.

The relations among participants in bill of exchange circulation have the characteristics of civil law relationships and are regulated by the special norms of bill of exchange legislation. In a majority of countries this legislation is based either on the Geneva bill of exchange conventions of 1930 or on English bill of exchange law. The USSR joined the Geneva bill of exchange conventions in 1936, and the decree of Aug. 7,1937, of the Central Executive Committee and Sovnarkhoz (Council of the Economy) set up the Statute on the Transferable and Simple Bill of Exchange, which was based on these conventions. The bill of exchange is used extensively in payment and credit relationships that arise in the sphere of economic cooperation between the USSR and the capitalist countries. In domestic USSR circulation, bill of exchange circulation was abolished in 1930 with the transition to the system of direct, target-directed bank crediting.

REFERENCE

Valiutnye otnosheniia vo vneshnei torgovle SSSR. Moscow, 1968. Pages 185-248, 326-48.

A. B. AL’TSHULLER