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FINANCIAL DOCUMENTS

FINANCIAL DOCUMENTS

FINANCIAL DOCUMENTS

Financial documents Commercial documents

The instruments used for Invoices, transport

obtaining the payment of documents, documents of
money title, and other documents
Bill of exchange not being financial
Promissory note documents
Cheques

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FINANCIAL DOCUMENTS

Bill of exchange Define and compare

Promissory note Important elements

Cheque Practice

Bill of Exchange (Draft)

Definition

Parties to Bill of exchange

Features

Practice drawing a bill of exchange

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Bill of Exchange (Draft) - Definition

à Bill of exchange is an unconditional order in writing to collect a certain money

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Bill of Exchange (Draft) - Definition

• No conditional states on the face of bill of exchange

• Cannot add any conditions to make payment
• Bill of exchange independent with the underlying sales contract

à Bill of exchange is an unconditional order to pay a certain of money

Bill of Exchange (Draft) - Definition

• Hand writing
• Typewriting à Bill of exchange must be made in writing
• Printing

Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) - Parties

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Bill of Exchange (Draft) – Maturity

Sight Bill (Sight draft):

§ Drawee has to pay immediately when receiving the B/E
§ B/E is payable on presentation to drawee

Time Bill (Term bill/ Term draft/ Time draft)

§ B/E is paid on a specified future date
§ Time bill needs to be accepted by the drawee before due date

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Bill of Exchange (Draft) – Acceptance

§ The acceptance is a guarantee of payment extended by the drawee towards the

order of the drawer
§ The drawee finalizes his acceptance by signing under the words “Accepted”
or “Acceptance” on the face of the bill à become an acceptor
§ The drawee has no liability on a bill of exchange itself until they accept the
bill
§ Acceptance only uses for time bill

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Bill of Exchange (Draft) – Numbers of copies

§ B/E normally issued in sets of 2 or 3

§ Each part of set is numbered
§ Only one part is be paid

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Bill of Exchange (Draft) – Negotiable instrument

§ B/E is a negotiable instrument (unless it stated not to be)

§ à BEN can assign his favour of the B/E to another by endorsement

Endorsement means the BEN of B/E signs on the back of the

B/E to transfer the property contained in it to another
àBEN becomes Endorser
à“Another” becomes Endorsee 21

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Bill of Exchange (Draft) – Other features

§ Unconditional order that seller draws to collect a certain of money

§ B/E is independent with the underlying contract
§ B/E can be negotiated or discounted by commercial banks

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Bill of Exchange (Draft)

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Bill of Exchange (Draft)

§ Date of issue:
- Issuing date cannot be earlier than shipment date
- Shipment date indicated in the transport documents

§ Place of issue: Seller’s country

§ Amount of money:
- Certain of money must be stated both in number and words

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Bill of Exchange (Draft)

Beneficiary: 3 options:
§ “Pay to + Specified name” à Named bill
à Cannot be negotiated/ endorsered
§ “Pay to + the order of + specified name” à Ordered bill
à Most common bill used and can be negotiated by endorsered
§ “Pay to + blank” à Holder/ Bearer bill
à Who hold the bill will be BEN

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Bill of Exchange (Draft)

§ Drawer: Seller

§ Drawee: Depends on the payment method

Payment method Drawee of Bill of exchange

Money remittance (T/T or TTr) Buyer
Collections Buyer
Documentary credit (L/C) Issuing bank (Buyer’s bank)

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Bill of Exchange (Draft)

The bill of exchange will be invalided by the following reasons:

§ Doesn’t indicate date of issue
§ Doesn’t show the certain of money
§ Doesn’t show the place of payment and place of issue

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Bill of Exchange (Draft) - Practice

Assignment: Draw the bill of exchange and Promissory note based on

information of sales contracts
§ Group assignment
§ Finish after this chapter

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Promissory Note (Note) - Definition

“Promissory note is an unconditional promise in writing made by one person to

another signed by the maker, engaging 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”

The Bill of Exchange Act 1882 (England)

à Unconditional promise in writing to pay a certain of money

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Promissory Note (Note) - Parties

à Unconditional promise in writing to pay a certain of money

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Promissory Note (Note) - Parties

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Promissory Note (Note) - Parties

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Promissory Note (Note) - Parties

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Promissory Note (Note) - Parties

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Promissory Note (Note) - Parties

Bill of exchange Promissory note
Cannot add any conditions for payment
Must be presented promptly for payment
Similarities
Negotiable instruments
Independent with underlying sales contract
Differences
Name B/E, Draft P/N, Note
Drawer Seller Buyer
Drawee Buyer/ Buyer’s bank NA
Beneficiary Seller/ Third party Seller/ Third party
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Cheque - Definition

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Cheque - Definition

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