Discuss the application of bill of exchange law in Malaysia.

1.0 Introduction

A bill of exchange is an unconditional order in writing, addressed by one person to another,

signed by the person giving it, 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.

An instrument which does not comply with these conditions, or which orders any act to be
done in addition to the payment of money, is not a bill of exchange.

An order to pay out of a particular fund is not unconditional within the meaning of this
section; but an unqualified order to pay, coupled with (a) an indication of a particular fund
out of which the drawee is to reimburse himself or a particular account to be debited with
the amount, or (b) a statement of the transaction which gives rise to the bill, is unconditional.

A bill is not invalid by reason— (a) that it is not dated; (b) that it does not specify the value
given, or that any value has been given therefor; (c) that it does not specify the place where
it is drawn or the place where it is payable.

2.0 Literature review-

A bill of exchange transaction can involve up to three parties. The drawee is the party that pays
the sum specified by the bill of exchange. The payee is the one who receives that sum. The
drawer is the party that obliges the drawee to pay the payee. The drawer and the payee are the
same entity unless the drawer transfers the bill of exchange to a third-party payee.

Unlike a check, however, a bill of exchange is a written document outlining a debtor's

indebtedness to a creditor. It’s not payable on demand and is usually extended with credit terms,
such as 90 days. As well, a bill of exchange must be accepted by the drawee to be valid.
 Bills of exchange generally do not pay interest, making them in essence post-dated checks.
They may accrue interest if not paid by a certain date, however, in which case the rate must be
specified on the instrument. They can, conversely, be transferred at a discount before the date
specified for payment.

3.0 Main issues of topic-

Dishonouring of cheques

Based on the case Kuchinta Auto Sdn Bhd v. CIMB Bank Bhd, the cheques where deposited in
the account have not been cleared for the payment. Besides, Kuchinta Auto Sdn Bhd also
discovered another of its CIMB’s cheques which it had issued to its creditors for the purpose of its
business and/or to its staff had not been honoured by CIMB Bank.

Kuchinta was deprived of the vital information that was required to facilitate the proper
management of its subject account. CIMB had a duty as a banker to notify or inform Kuchinta as
its customers this information. CIMB had failed to discharge its contractual obligations towards
Kuchinta by failing to notify or inform the plaintiff of the FEA.

As CIMB had honoured some of Kuchinta’s CIMB cheques before, it was reasonable for Kuchinta
to assume that its seven CIMB’s cheques would be honoured by CIMB. However, this FEA was
not mentioned in the pleadings.

From the dishonouring of the CIMB cheques by CIMB would affects the reputation of Kuchinta
as a Proton Edar new car dealer in the eyes of the recipients of those cheques. According to the
Kuchinta’s claim for the damages under the tort of defamation that it is defamatory for CIMB to
stamp the words “refer to drawer” on the returned cheques.

4.0 Findings and discussion-

5.0 Policy recommendations –

6.0 Conclusion
References
http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%20204%20-%20Bill
s%20of%20Exchange%20Act%201949.pdf

https://www.cljlaw.com/Members/ViewCasePDF.aspx?CaseId=2964849288&SearchId=4psb