CHAPTER 9

BILLS OF EXCHANGE
Para.
Para. 9-007
9-002 The claused bill .... . .. .. .. .... ..
The documentary bill .. , .... .. . .. 9-008
account · · · · · · : : : : 9-003 Avalised bills . . . . .. . , . . , . . .. . ... 9-009
I ofl opeJJof exchange . . .
9-004 9-010
1 bY b1Ilsb.ll of exch ange . ... 9-005 Bills drawn in a set .... .. . . ... , . .
r,,111cn
,01en of the
1 • ••• • •• • • • : • • Negotiation of bills by exporter .. , 9-011
P•'~a1ure bills .. .. :00 . . on International Proceedings on bills of exchange . . 9-012
pore$ , c0 nventI d International 6
'file, of exchange a(f988) .... ... 9-00
s1ilS. or'j Notes
prorlltSS

clause dealing 9-001

ct for the sale of goods abroad, the
In everJ contr:nt of the purchase pri
ce embodies four elements:
nt. The various methods of
r11 i th the /a~ ac e and currency of payme
iations and permutations of
time, mo e,xpp orts represent, in law, var
·ncr for e .
paY1 ~ ur elements. th~ds_ of pa y~ en t wh I~h
these iantile custom has de~el?ped me ic mterests mvolved m
Mer t to reconcile the confhctmg econom obtain the purchase
st is to
atternf transactions. The exporter's intere
trans~ort ~oc~ments are
e%~r as soon as possible, however if the
porter ~ill not wish to p_art
~ocuments of title to .t_!1e go?ds:,·- t~~ ~~ nt, · or at least confirmati~n
with these before havmg rec~-1ved payme , _on the other hand, will
ye~
that his draft has been accepted. The _bu until the do cu me nts -an d
wish to postpone payment of the ·pnce . in the · disposition of the
notably the bills of lad ing -ar e ;BO 'longer conflicting interests, the
se
seller. To achieve a reconciliation of the essary.
interposition of a bank, or of banks, is· nec which banks are involved
The most frequent payment methods in er a letter of credit. In a
und
are a collection arrangement or payment its instructions from the
I/ coll ection arrangement the bank receives of title represenfmg i he
I seller. The exchange of . the aoc uments
lly effected at the place
gm and the payment of_the price is norma rsely, in the case of a
Conve
at which the buyer carries on business. k usually emanate from the
letter of credit the instruction5 to the ban and the price is normally
buyer. The exchange of the documents A considerable amount of
eff~cted at the seller's place of businecress.
dit under which the banker,
busmess is transacted under letters of mises to accept, honour or
' on th_e instructions of the buyer, pro seller. Both these methods,
negotiate bills of exchange drawn by theletter of credit, enable the
~he collection arrangement and the uments of title as a collateral
IIlterposed bank or banks to use the doc
security.
are made which do not
O~casionally, payment arrangements buyer may transfer the price
require the interposition of banks. The
 162 Bills of Exchange
payment on Open Account 163
to the seller on open accoun~ or th~ seller may sen
documentary bill of exchange, 1.e. a bill of exchang d the b tracts direct payment b~ the buyer is not the normal
. attached:i ~~ a
e to 'Wh·Ich t(t i.f- con t· usually payment 1s effected through a bank,
of lading 1s fO·b· 0J~f payrn~~;tion arrangement or under a letter of credit.JO
9
This chapter considers ~~thods of payment Which c~ilJ . ettJ0 def a co
sarily involve the interpos1t10~ of a bank and deaJs ~o n n 111 ofl
01 eit'1 er PAYMENT BY BILLS OF EXCHANGE11
with bills of exchan~e. These mstruments are not ~ In Pattic~s.
0 1
the buyer makes direct yayment to the seller but YUsed %ar,
frequently used in collection ~nd lett~r of credit arran ~e also :re er does not remit the purchase price on open 9-0 03
The following chapters will consider collection g Illents. 11 ~ allY, the birs the exporter to draw a bill of exchangeu on
4 j orfl1ot but all eroent offers advantages to both parties. The
letters of credit,3 bank guarantees, and factoring, forf~~f~nge~en~,1 ' · arrang · hi h h
leasing and other forms of merchant finance for iexports}' financial a~coll13 '[bJS . a negotiable rnstrume~t w c e can tum into cash
5
b101 · rter ob_talll t nee and the buyer IS allowed a definite period of
0
0
PAYMENT ON OPEN AccC?DNT exF egotiat1on a nt u~ess the bill is payable at sight. 14 If the parties
b" o ttlerne h .. .
' dit for se ress arrangements, t e custom prevailing m the
9-002 In the simplest case, the parties agree on "cash with Ord r'' ere ke exp h h · ·
fail to Jila ade determines w_het er t e pnce 1s to be paid on open
An exporter who is able t? sell on t~e~e terms reduces th; finte~s. articular tr b'll and on which terms the latter has to be drawn.
risk of the export transaction to a mm1mum. . anc1a1 p tor by I '
accouo
Sometim~s the parties agree on "sight payme:i;it", either in ster·· f the bill of exchange
or in a foreign currency. Here, the buyer has to remit the p ~Ing Nature o
price when prese~ted with the documents of title }o. t~e,g~O:to~se overning bills of exch~nge is codified in_ the Bills of 9-004
Sight payment IS arranged when the exporter IS acquaiktea1' 1,,dh, 'fhe )awe ~ct 1882. _This Act, which has been descnbed 15 as "the
. 1status of t.he buyer and has no ,doubt about,hi~.so)ven
the financia 'u. Wit·1 1, • ! ,
t Exch~g fted Act of Parliament ever passed", should be studied
r:~esfuJ; bys.3everyone
The expo~ter sends the d?cuments . to the buye_r w~!J rHmjt,s;· be
5t who- has to deal with bills of exchange. The Act
agreed 6pnce by telegraphic transfer (TIT),_mad , (M(I;) oii-by1a
in a bill of exchange as:
SWIFf transfer. T~ese remittanc~s are us~ally .c;arrie~ .04t !hroJgh
the buyer's bank. Sight payment 1s sometimes .atrange,d,.when the /. . . an unconditional order in writing, addressed by one person to another,
exporter sells goods to his own overseas branch or subsidiary, Here, signed by the person giving it, requiring ~e person to w~om it is addressed to
"the seller ships to his branch and settlement is .usually,a matter qf pay on demand or" at a fixed or detenrunable future tune a sum certain in
periodical remittance. There may even .be a two-wayd rading,:, as money to or to the order of a specified person, or to bearer."
where raw materials ,are drawn from the territorywhere ,th~ p{oducts
are finally marketed, in which case settlement between patent·and This definition can be expressed in graphic form as follows:
offspring is a matter of running accounts and ,periodical remitt~nces
of balances due".7 . . _ · i, ·
London, January 10,
If the exporter is not familiar with the financial status"0f the buyer 20 .....
or. other circumstances demand it, he can arrange that ·the ·,Pu!ch~~~
pnce shall be paid "cash against documents" or "cash on ·delivery ; £10,000 · On demand* pay Britannia Bank Limited or Order* * the
Toes~ clauses are particularly suitable when delivery -of the g~ods sum of ten thousand pounds for value received.
sold is to take place ex works. "Cash on delivery" can also be
arranged for transportation of goods by land under the qi,1R.s ~n 1
: See below, para .1 O--Oo 1.
1 i1 See b~low, para.11-001.
2
See below, para,9--008. On bills of ex h
3
See below, para.10-001. edn, 200S . E c. ange generally see Guest, Chalmers and Guest on Bills of Exchange, (16th
4
See below, para.11--001 2001); c~'t lhott, Odgers and Phillips, Byles on Bills of Exchange and Cheques, (27th edn\
5
See below, para.12--001 · Documentaryty,CCod,~tracts (29th edn, 2004), Ch.34; Hedley, Bills of Exchange and Bankers
12
6 See below, para.B--001:
. The e . re lls ( 4th edn 2001)
IJ xpress1on "b1·u ' .
An independe t tw k . I fn ancial of exchange" and "draft" have the same meaning.
,
For an exam 1
Com . . n ne or operated by the Society for World Wide Internatwna 1L v pf
Lloyd's Rep P e of such a transaction, see Credito Italiano v M Bimhak & Sons Ltd (1967] 1
1
8
W.W. Syrettn~~i~::~:e~(
E/ect: ~:c;~10ns. Its website can be fo und at http://www.swift.com. See Geva, Th,e {~)-
Export Pitm'an p 44 .
19
92); ~ri~dle and Cox, Law of Bank Payments (3rd :~~tute of
Exports , m Talks about Exports, published by the 1
c
1986
b ] A.C. 78S
· 314 at 320 A · ·
[°°tract in Leigh d ·. sim.Ilar arrangement was agreed upon by the parties to a c. and f.
H~ bSil/?van Ltd v Alia/anon Shipping Co Ltd [1985] Q.B. 350, CA; affd
'
See below, , •
para.18-00l. e ow, para. I 4-00·1.
, on countertrade see b I
11 0ank (in the cir~um ' ut lil this case the bill of exchange was to be endorsed by the bu)'t".r·s
1
Pe: negoti~tion, see s~a~ces the bank declined to back the bill).
~:~r~:;:~llL??
1
Macl<innon LJ. i~ _si~~t bills and time bills, see below, parn. ~,
164 Bills of &change payment by Bills of Exchange 165
rior parties amongst themselves, and may enforce
available t~r~es liable on the bill."
To Exports li . coccs iost all p
&c f t aga • . .
'29i '
0
Imports Inc, lliite~ 11yrnc • is a holder who took a bill, which is complete
P .• due couisei of it in good faith and for value and without
Boston, r 11, . he face , . . .
o.lde r oil t in the title of the person negohatmg 1t to him
U.S.A. I
A,,d regtlf aanY defect erdue and without notice that it was dishon~
~" tice of re it was ov h lder who denves · his ht· 1e through a holder in
*or-On March 10, 19 ..... 0 O
~d be 29(1))· Ah ~s not himself a party to any fraud or illegality
*or-Ninety days after sight. **or-...t.
, oearer 00 red (s;se0
ail~ who all the rights of that holder in due course as
doe c? g tbe bill, as and all parties to the bill prior to that holder
There are three original parties to a bill of exchange· th affectdin5 tbe acceptortly where a bill is negotiated to a holder in due
drawee and the payee. They are, m · ectra
· the preceq4J_g exam le· Wer,t~e reg ar(3))· con sequen '
n dishonour · retume d mto
1s · the possession
· of the
Ltd (the drawer), Imports Inc (the drawee), and Brifa:nn} BBxpo ~ (s.29e but later O by virtue of s.29(3), has all the rights of that
1
(the payee). The drawer and the payee, or the drawee an~ thank ltu coorser tbe latter, e ,s A holder of a bill is prima facie presumed to
may be the same pers?n, but where the drawer antj the·dra ~ Payee draw ' d e cours . . . . d . d
Jder in u . d course, but if 1t 1s a Illltte or proved that the
the same person the ?ill may be treate?, at the option bf thtee are h0 a bolder .10 u\ subsequent negotiation of the bill is affected by
of the bill, as a ~r~rrussory ~ote or a bill of.exchange (s,?.). 16 holder ~~ceptance, iss~: ~orce and fear, or illegality, the burden of proof is
The characteristics of a bill of exchange are: · ·· fraud,19 dures~se circumstances the bolder has to prove, first, that
shifted. In !~en at the relevant time and, secondly, that he acted in
(a) Every obligation arising under the bill ·mus't he ·expres d. value w~s gis 30(2) ).20
writing on the bill and signed by the _party li~ble (s.23t 10 good fait~} b noted that a bill of exchange does not represent an
(b) Th~ obli~~tions: st_ipu,~ated in t_~e bill c~n be, Jiab.s(erred I! ~h00 Ob~gation but contains a number of obligations which,
1
easily by negoti_ation o~ the. b1l.l, often. -~. perfor!J).ance of ind!vidt independent in certain respects, are in others closely
the sale of the bill at a discount if the bill is a time bill ie ~bileco:~ted since !h_ey are ~mbodi~d in the same doc~ment.
contains a credit element. The negotiation is .do.qe, in':tb~ mter lly all thre'e onginal parties are hable to honour the bdl: the
case of a bill to bearer, by mere delivery of the bill,,and, .jo dGenera er by,drawmg . 1t. (s.55 ); th e drawee by wntmg . . his acceptance on,
the case of a bill to order, both by delivery of the bill and ~a:Sually across, the b~, where~y he becomes_ t~e a~ceptor (s.17);
indorsement (s.31). 17 0
and the payee by indorsmg the bill when. negotiatl?g 1t, whereby ?e
(c) Performance of the obligations stipulated in the bill can only becomes the indoJser (s.55(2)(a)). Sometimes, a bill may be consid-
be claimed by a person holding the document. This person is ered to be irregular if, for instance, it bears an irregular indorse-
called the holder of the bill and is defined, in s.2, as the ment. "When is an indorsement irregular? Lord Denning held that it
payee or indorsee or bearer of the bill, who is in possession is irregular whenever it is such as to give rise to doubt whether it is
of the bill. the indorsement of the named payee. A bill of exchange is like
(d) The person to whom a bill is negotiated may acq~ir~ a currencr ~t should be above suspicion". 21
better right under it than his predecessors possess. This 1s a " In pn~c1ple, every person signing a bill of exchange, even the mere
remarkable exception to the common law principle that no _backer of the bill (s.56), incurs liability, 22 but the drawer or an
transferee can acquire a better title than his transfer?r. The indorser can negative his liability by adding the words "without
recours " (e sans recours) to his signature.
object of this rule is to facilitate the negotiation of b1lls. F urther a pers . . bill .
Section 38(2) expresses the rule as follows: negativ i{· l' . ?n signmg a as drawer, mdorser or acceptor can
e is iabihty by adding words to his signature indicating that
"where he ['i.e. the holder of a bill] is 'holder in due course,, he hOIds the•billal is lade !me .
free from any defect of title of prior parties, as well as from mere person [1978] Q~aflonal Steel Stahl und Eisen GmbH & Co KG v Robert Nicholas (Steels) Ltd
""Fraud" . . 917. .
16
17
~ S'Elite Lt:[l~;\ here a common law fraud, i.e. dishonesty: Osterreiclzische La11derba11k v
1Q.B. 565.
~
References here and on the following
. pages are to the Btlls
. of Exchan ge" Act
ccount
1882.payee" r, Bank of C
Since the passing of the Cheques Act 1992, cheques bearing the words bl instruments,0
11
Per Dennrtt fl? don) Ltd
11
V Jones (1984) 134 N.L.J. 522.
~ ~ean
"a/c payee" are not transferable and thus are now no longer negotia e
s.81A(l) as inserted by Cheques Act 1992 s.l. both fhe ·fr Ln Arab Bank Ltd v Ross [1952] 2 Q.B. 216 at 227. "Face" was he.Id to
ee below ont and back of the bill
1 , para.9-009. ·
Jl.
166
he signs for or on behalf of a r · •
23

Bills of Excha,1ge
.;;;i ~
- .. .~
payrnerr t
.
by sills of Exchange
.
ally inserted in the bill when it 1s

167
. .
· b anking
capacity ; but the addition of des~rtt~1Pal or in ayrnen t ,s norm ·
• ht bill or a tlIDe b"ll
1, m
. agen t" or " company duector"
s1on . mp ive wo rds, sua re Pres tirfle of·nP is et'ther ab"ll Sigor usance bill.
· The latter ex:pres~1on ·
him from personal liability (s.26(1)') ay not be sumc~ ns ''cen,i\t~ 111c ,r11e bl ailed a te!tn ~ill drawn for a period customary m a
The pnm~ry · 1·rnb·1· · res
1 tty to pay the bill
~awer and mdorsers are only liable 00 ts 11Pon the d
cient lo 0e~lli lt\ise_
elt\Pt
tt~f-
Jr,11\l~~ge alsfo ~red to a defined in s.10(1) of the Act, as a bill:
1;,rtg~', IIY re e A sight bt is
dishonours the bill and they have receivedr~~~~rse, i.e. if ~awee. '1!1oautar trade-
ort.,,
,,,uc d t be payable on deman d , or at s1g . h t, or
holder or a subsequent indorser. Return of thee ?f dish() he dri\~e P . e,cpresse
0
suf:fici~nt notice of dishonour (s.49(6)). e d1shonou~ur?Ythe nich is · 0 or
-/\. bill payable on demand (sight bill) is d' d b,11 is e ••(a) w presentati? ' for payment is expressed."
on h. h no ume
paid on presentation. A time bill is dishonour~~~n?u~ed if it. a (b) ·oW 1C
by the drawee when presented to him f if It is not a 18 not
I fiXed future time or a determinable • future
presentment is excused) or if n0t paid by 0~. acceptance c(%d b'll is payable a\ ~ter case it is usually payable a fixed period
a_ccep~ance is required where the bill is payabl~m. Pres~ntme~~le5s lo
Ati!fle 11). In th e } inety days after sight" . A bill payable at an
sight m order to fix the maturity of the -bill (s ~ certain tirne ~or time ~\e ~r sight, e.g. nontinoency is not a bill of exchange in the
course, no presentment for acceptance in the c~ 1:here er (lp. i: t:irl
after date or ~n an~e ue;tly, a bill would be 29bad if pay~ble "on
the ~ase of a time bill, the bill is due and payabl~e a sight.biU'. ~ ° unc:!iog of the laW? c~ tei "by" a certain date, "after sight", or
the ~~ of payment as fixed ~y the bill. .If that is a n~~~e l~st day of me(I.I... " a certain a '
0 .
the bill 1s due on the succeedmg business day.24 busmess day, ~r beforearrival of stearn er" e~t30 is specified in the bill by the drawer or, if
O place ~f ptayrndo so by the acceptor when accepting the bill.
0The
Bills of exchange must be presented .for payment "b th
by some person authoris_ed to receive payment on fus ~elolder or the drawe r fails ·u . Oade payable ' at a b anker 's offi ce, b ut this 1s
· not a
reasonable hour on a busmess day, at tbe proper P,lace as·h ~ at a
defined, either to th~ person designated by the .bill as ·pat~~~~er
;\:e
l)su~ly, ab: law. Where a particular place is spec~ed as the
requli'eroen 0 nt that place is not regarded as the exclusive place of
some person authonsed to pay ,or r(?fuse p.;tyn;tent on his b~hal/? p\aceofpt~(Z)(c)) and the acceptor can be sued for payment at
with the exercise of reasonably d.iligen~~ such I?efson can be found~ payment lsa.ce But ;here it is expressly stated that the bill shall be
(s.45(3)). Further, the holder must exhib!t the_ biU_t~ the:person·from another
.d t the P particular
· place only and note1sewh ere, the acceptor can
whom he demands ·payment and dehver 1t to him when it is P~y ~e sued at that place. Where the acceptor adds an exclusive
honoured. (s.52(4)). · ~lace of payment to his acceptance, the holder of the bill is entitled
The Deregulation (Bills of Exchange) Order 19962s- now allows to treat the acceptance as qualified and the bill as dishonoured
collecting banks to present cheques for payment by notification of (s.44), but he cannot claim this right if the place of payment is not
the "essential features by electronic Q:Ieans or otherwise" of the
made exclusive. In one case31 a Polish firm drew a bill on "X Y,
cheque, instead of presenting the cheque itself. 26 . Plantation House, Mincing Lane, London, payable in Amsterdam at
The drawer or any indorser may insert j.n the bill the name of a
the AB Bank". The bill was drawn on May 1, 1939, and payable in
person to whom the holder may resort if the bill is dishonoured by
non-acceptance or non-payment (s.15). Such person is called "t~; Dutch florins on Novem':'er 1, 1939. It was duly accepted by X Y, but
could not be presented m Amsterdam owing to the outbreak of the
referee in case of need". The bill must be protested or not~
before it can be presented to the referee '(s.67). In th~ Uruted :~ond W?rld War. Although the place of payment was in Holland
Kingdom presentment in case of n~e d 1~ · l, but m many
• opt10na lain~~ Stlpulate? currency Dutch florins, the court held that the
overseas countries such presentment 1s obligatory. ~t dwas entitled to recovery from X Y in London because
er am was not stipulated as the only place of payment.
. "for and on
n But where the bill was accepted by a company and later indorse~ by a drrectorthe company
behalf of the company" the director was held to be personally liable because b' d himself
was already liable on the acceptance and his intention must hav; been 10. : decision
: ll'il/iamso,i v Rider {1963] 1 Q.B. 89.
(s.26(2)): Rolfe Lubbe/1 & Co v Keith and Greenwood (1979] 2 Lloyds Rep.t·i 1He/las SA 1•
rests on its facts and does not reveal a general principle; see also Nova 11 ~ Claydo11 v Bradley {1987] 1 WLR 521
hwas held' K . . . . ,
Kumas Bros Intematwnal Ltd (1998] C.L.C. 971, CA. . . Dealings Act 548 al m area Exchange Bank v Debenhams (Central Buying) Ltd (1979] 1 Lloyd~ Rep.
1 551
2A Bills of Exchange Act 1882 s.14(1) as substituted by the Banking and Financia "gi'bbe . h': CA that_the words " At 90 days documents against acceptance .. . pay' were
25
1971 s.3(2). w:
thus not~t-lhe tnstrument was not payable at a fixed or determinable future ~e and
SI 1996/2993. ulation (Bills 01 11998] C.L.c. 9;~ of e~change. See also Novaknit Hellas SA v Kumar Bros Jncemanonal Ltd
u. See Bills of Exchange Act 1882 s.74B(l) as amended by s.4(1) of the Dereg "11998] C.Lc. ' CA; Hong Kong and Shanghai Banking Corp Ltd v GD Trade Co Lid
Exchange) Order 1996. Bank Polski 238 ' CA.
ri See below, paras 9--005 and 10--003. v Kl Mulder & Co [1942] 1 KB. 497.
 168
Bills of E.-tcfza11ge
Foreign bills t bv Bills of Exchange 169
payrnen J
. these two systems, UNCITRAL prepared a
1
9-00S The Bills of Exchange Act 1882 conta· . to reconci eational Bills of Exchange and Promissory
32
dealing with foreign bills. A foreign bill i!~ b1.lllPortau Jfl ord_ern on Interi;oved by the General Assembly of the United
1 nvent 1~ich was abppr 9' 1988. The Conven tion's aim is to create
d . . .
(a) either is33 draWn by a person who is not ill .
\Vhich·· Prov·1 . '•1 Co ,1 V/JJ peeern
r-ioteS O
e
- which persons engage m mtemational trade
Islands • res1ctellt · r-iati?ns j~strurnent~f the existing instru~ents t_o make paY_IDent or to
. dra~ ' by a person resident in the ll . . in the &·.% pecial e in pJace . .ons will apply only if the mstrument m question
(b) or IS 11 ~jght usdit. Its provtSiational Bill of Exchange (UNCITRAL RAL Conven-
person resident abroad and is payable b r1t1sh Island . ory Note (UNCIT
give cre . 03 te d ''Intern
tional Promiss Conven-
a road. son ' js de~'.g or "l~tedrn~gnation must appear in the heading and the text
All other bills are inland bills (s.4). It shouJct b tiofl),, and this es1 ,
not necessarily a foreign bill if it is payable abr~a~oted. tliat ahilt . ti 011h) jnstrume~fy wri·ting ' the Conven tion has not been adopted in
. . 1
resides abroad; on!~ if these two elements are combfr ti the d~~' ft e . e o
o p..t the um_ dam. It will come mto o~eratl?n 2 months after the
foreign bill, while 1t 1s always a foreign bill if th ~ed 18 th, hilt' United I(i~g f the instrument of rati:ficat10n or accession by 10
abroad. If it is uncertain whether a hill is an inlancteb. ;•wer <e,~ the f deposit o ,
.
bill, it is treated as an inland bill (s.4(2)). The llJ11. or ! fo<ei~ date o
states.
between inland bills and foreign bills is that the latter,:: : difr,1,nce
be formally protested upon dishonour by non-acceptance ..f!JJ~ ~an the cla
used bill
payment (s.51), while no protest is required for inland bi;r bl'°'·
respect English law differs from many. foreign law, \vhich\k°'llu, t customary in the export trade is not no~ally in the simple 9-007
The draf ut at above, para.9-0 03, but contams a number of
prescribe a protest for .inland bills: In ,view .of these and ,': : . . 1 f
forIll. . set oclauses. The followmg 1s an examp e o a draft as used in
differences between Engbsh and foreign law, rt rs often irnponan additiona1
know whether the obligation of a person who signed a,bill ;, 11 i .
export transact10ns:
judged by English law or a particular system of foreign law. The10A!
contains, in s. 72, detailed rules on the conflict of law, relatint.to hill, No. 1285
of exchange. 34 .,· Liverpool, February 15,
Where the bill is expressed in foreign cuirency, but is payable m 20 ·····
England,. 35judgment can be obtained in the English courts in foreign Exchange
currency $10,000 Ninety days after sight of this our First of
(Second and Third of the same date and tenor unpaid) pay
The UN Convention on International Bills of Exchange and Inter. Britannia Bank Limited or Order the sum of ten thousand
national Promissory Notes (1988) Pounds Sterling, payable at the collecting Bank's selling
rate for sight drafts on $10,000 London,with interest at 12
9 006 G
lobally the law of bills of exchange 1s· d'IVI·ded m · tO twoG legal per cent per annum added thereto from date hereof to due
. lionseneva
Geneva system, .,,oun ded . on the and date of payment, value received.
- 36 are the
families. , They
Conventions which has been adopted m CIVIi law Jur.isdd;cK.id'om Exports Limited.
· app1·ies m
the Anglo-A'merican system, which S
· the .Urute · dngothe,' To:
most countries of the Commonwealth, the United tates an
common law jurisdictions. Imports Inc,
Boston,
32
33 Collins, Dicey and Morris, The Conflict of Laws (14th
edn, 2006), Vol.2, p.1804 el ~eq. nd U.S.A.
Bnt~~ aent
TI1e term "British Islands" includes any part of the United Kingdom of Great
a 1ac
Ireland, the Islands of Man, Guernsey, Jersey, Alderney and Sark, and the islands
dominions of the Crown. el seq.
34 to any of them being part of the t
to the clauses providin!!.., for paymen
35 See Collins, Dicey and Morris, The Conflict of Laws
(14th edn, 2006) at para.33-J38Barclays
see a s 'firegard should be had
aPtarticutar .
Administra tion of Justice Act 1977 s.4 (repealing BOE ss.57(2) and 72(4) and peci c rate of exchange or adding, to the sum payable , mterest
Levin Brothers (Bradford) Ltd [1977] Q.B. 270; . t Bills of
36 Bank International Ltd v ]) "lb
on the
TI1ere are three Geneva Conventions on the Unification of the Law relatrng O e text of the C . • ,
Exchange of June 7, 1930, and three further Conventions signed at Geneva
Unification of the Law relating to Cheques of March 19, 1931. 0deke, "The U . onventton may be found at http://www.u11citra//org; see also .-\ u~muni-
Notes" [1992] /Blled Nations Convention on Intematio11a/ Bills of Et:cha11ge and Premi_'--~'-''
· .L 281.
 170 171
Bills of Exchange . by Bills of Exchange
payment
or specified charges. Thus, payment is stipu! t Joss in exchange;
bank's sellmg • h t drafts on London"aanect ,,. a_t the
. rate for s1g without
able .
"interest at 12 per cent per annum .. ,. from dat d it IS Prov:11,,,; ) paY 'th stamps,
of payment" shall be added to the stipulated s e hereof to dco t~a~0 (C ayable w1 nkers' charges;
very common, particularly when the bill is lllaJill, Such_ clauue da1c (d) P able With ba . bank's charges;
currency because various rates of exchange no~aYable in ;es ~re ) paY . h collectlllg
currencies in force at the buyer's and . seller's r ~1Y~eXist f~re,&n (e payable wit t1·ating bank's charges.
(0 'th nego
unavoidable, when the bill is negotiated, that ines.~ ence,. an/ 1~c ayment of interest from the d~te of
) payable WI .
such as bankers' charg~s or foreign stamp duties -; 1 ~ntaJ elCPenll is
where payment has to be made by sterling ·draft !0curred. B!es, I~ (g
does o
ot provide for p ded from the time of matunty of
l be deman
/..e bi~! rest can on Y bill does not provide that the mci en
. 'd tal
insert exchange and charges clauses in the bill in orde 1~ advisable ~n
1(£ :°biil, ,ote7(1 )(b) ). If the. the drawee, they fall upo~ the _dra:Ver.
certainty the financial obligations of the parties in t~ 0 define \I/ii~ 1
no objection exists to msertmg m the
e case of any ~e bill (s.5 Id be borne br
unforeseen fl~c~,ation~ ~ ' the rate of exchange. Inarges shO~egal point of vteW,te of exchange or the payment of
The followrng floatmg exchange clauses,are found in cl c frolll the regulating . t~lle raf Exchange Act 1882 provides that the
in export transactions: rafts Used Jauses The B1 s o . . " 39 b t
bill c charges. . h to be " a sum certam m money , u
interest ~~le by the bill as
(a) payable at the bank's drawing rate for demand d f so!ll ~ay 9(1) that:
London; · ra ts on
adds J1l s, bill is a sum certain within the meaning of this Act,
ayable by a .
(b) payable at collecting bank's selling rate for- Telegr, hie "the sum _P. uired to be paid-
Transfer . , P although it IS req
' '
(a) With interest
(c) payable at collecting bank's selling rate for sight ,·drafts on
London; ·· · . · dicated rate of exchange or according to a rate of
(d) Acco
rdin gtot~t~s:rtained as directed by the bill."
(d) payable at collecting bank's selling rate for 90 days ,after exchange ·
sight drafts on London;
"payable with interest at . .. per cent per annum from
(e) payable by approved .bank's draft on London, exchange per The cIause ue date of arnval · ·
of reIIllttance · Lon don" 1s
m · of
indorsement. · .! .. , date hereof to d · 1· 40 h h
1
doubtful legal validity. It was held by a co~t m Au~tra 1a t at t e
clause was invalid on the ground of uncertamty, . mamly because ~he
Some of these cla~ses are customary i?- the 'tr~de ;with ·particular terminal date of interest could not be ascertamed from anythmg
overseas countries and others are used wherr the bl.jyer intends to appearing on the face of the bill. It is submitted, with great respect,
obtain finance in a particular manner. Thi.Is, "exchange as per that this view is incorrect. That the requirement of payment of
indorsement" _clauses are mainly used where t,he sell~t wishes to
interest does not invalidate the bill is expressly provided by s.9(1)(a)
discount the bill to bank; the bank' then includes its d1sco'unt in the
sum payable when converting the stipulated currency,·ihto the foeal of the Act of 1882. The payment of interest is merely ancillary to the
currency of the drawee. 38 paym_ent of the main sum, and it is thought that the requirement of
As alternatives to the clause stated in the example, above, the certamty does not extend to ancillary sums such as interest and
'
following clauses relating to charges and interest are found, s_ome: . nge, wit· h the same rigour as to the main sum. But the rate of
excha
mterest must b "fi d . h . . .
times combined with one another and added to an exchange clause. s . e spec1 e m t e bill. Banks m the City of London
. .
omet1mes cons'Id th 1
on the er e c ause under exammat10n as unacceptable
(a) payable with interest at ... per cent per annum from date ground of un t · H .
Yet been called cer a~nty. ?Wever, the Enghsh courts have not
hereof to due date of arrival of remittance in London; The clause "upon to gi~e therr ruling on the clause.
(b) payable with exchange; Protect the d payable· without loss in exchange" is desioned to
rawer a l 0
rate of exchan e ga1?- st oss caused by an adverse alteration of the
38
In view of the possibility of currency devaluations, it is advisable to_speci·tY the exchange
front of the g ' particularly during the time which might elapse
calculation expressly in the indorsement and not to rely on the details 0 ~ th ~t l l969 (4) ~ See ab
bill: Tropic Plastic and Packaging Industry v Standard Bank of South Africa 1 ~ C ove, Para.9-004
S.A.L.R. 108; see the note in (1970] J.B.L. 121-122. ~~~WB
1 . -
Australia). ank of A ustralia v Rosen/win & Co [1922] Vic.LR. 155 (High C1:1urt ot
f
 172 Bills of Exchange payment by Bills of Et:change
173
betwe en the depos it of the price by the buyer . ·an:.f.. ring " under writin g". But, influenced b th
bis bank a~d the releas e of the curren cy of exc\: 10 CUtre
ca1 ed term S11;,•-ur
·ce it has come · . e
agam l.Ilto use in
or the foreig n centra l bank -to ~he seller after cige
?Y the ncy '~tn . ritiqu•1t ta! pr~ctli rly in conne ction with forfaiting.46 -the Jn·t
1
foreig n excha nge contro l regula tmns. ed
mphan 1 ce ~tte ,1 t1flefl arucu ~ . .
A draft expres sed in _f~reig n curren cy
1 c~ 0 gd 0 fll , P prov1des.
need \Vith t~ J{1fl ·oo 56
excha nge clause; the prov1s 1ons of s.9(1)
5ectl sigJ1S .
a b_ill otherw ise than as _d rawer or acceptor, he thereb
(d) of th not cont . e a pers_o_n. of an i:ndorse r to a holder m due course.
permissive. 41 If no excha n~e clause is inserte d :
" Y
Act are a,~ an ,,wher
the
tiab1litleS
excha nge canno t be ascerta_med by refere nce to th:d the rtre1~
avai·ser incurs the liabilities
incurs of
trade, it is calcul ated accord mg to the rate of sight d 1 • . f an .indorser to a hold
of paym ent on
?storn of of ough tbe he is not in t~e ~~s_1t1 0n o ~ mdorser.47 He is, er as
the day
claiming that rate of excha
the bill is payab le (s.n{ \ts a~ thep the pJtdl1 e course, ntor of the bab1ht1es of an m1mediate party to the
nge, judgm ent may be' but_ tnstea/e
1 ·o u
t served, cruara
a ods on the wor d' f th al h ·
foreign curren cy in which the draft is expressed ao mg o e av on t e mstrum ent whose
dtainect in thf o~ (t depen a}iser guara ntees. He may guara ntee payme
conve rsion into sterlin g is then the date on th e date ~ nt by the
which enfi ~1 1bilities the ;v one of the indors ers, or payme nt by all
judgm ent is sough t. 42 0 immediate
rcement of the 1ta eptor, or Y ptor and those liable on recou rse .
ace the acce
rties, N[ontage Gm bH v I rvam·4s th e plamtiff . . s, a Germa
.,;Fife documentary bill P\ 1
G (\id in 1976 tbre_e cold st~res to an Irania n _comp any
n
of
mpaflY, d f ndant Jrvam was chairm an and manag mg directo r.
9-008 The seller often attach
0
~hich the e ~ the purch ase price was payab le in 30 semi-a
es to a bill of excha nge which he has d nnual
the buyer the bill of lading to the goods sold. Such a '[he balance O e· these bills were in DM payab le
is known as a documentary bill.· The purpo
bill.of
9
ra;n
°n bills of ex.cha~g that the defen dant shoul d guara
in
ntee
Londo
the
n. It was
bills. The
se of issuing a d~x . ange furthe_r agre:t ed the -30 drafts to the Irania n buyers
m~ in1~ to ens~r
.
t~ bill 1s - h h b h l , , cumen- who duly
et at t.
lading and with 1t, !he nght of d1sp~sal of t~e
e uyer s a l not
goods,
receive
unless
the'bill of plaintiff~ {h~rn and the defen dant Irvani si~ed the~ on the back.
he has accepte the plaint iffs sent the
first accep ted or paid the atta~h ed ~Ill of excga nge drafts to t~eir bank m Germ any-
accord ing to the When tl for - colle ction -the
arrang ement betwe en the partie s. If the bank advise d that the defend ant
buyer fails to honour the bill appalrdenbey asked to add the words
of exchange, he has to return the bill of ladjng , and, if, he wronwlly shou
"ban pour aval pour les tires"
retain s the latter, the law presu mes that the prope rty ood as· a guara ntee for t h d e rawe~ s ) b
. a ove h. ·
1s signat
il) the goods ure. On the
sold has not passe d to hlm. 43
I' (g thority -of the defen dants ; the plamt iffs added these
, , words. After
Occasionally, the tenor of the ::e Iranian revolu tion in Febru ary 1979 some of the
docum entary ~ill _c.o nt'ains a c)ear outsta nding bills
refere nce to the expor t transa ction to whi¢h .the bill were dishon oured . No notice of disho nour was given
. relates . .Such with respec t to
statem ents do not rende r the bill of exc;ha these bills, and in the case of some of them the
nge void though they are, protes t was not
of course, superf luous (s.3( 4)(b )). The practi ce of insetti carried out in the time requi red by s.51 of the Bills of
ng them is Excha nge Act.
conve nient, and facilit ates the carefu l check The plainti#'s sued the defen dant Irvani , who had
ing of bills ana docu- fled from Iran,
ments which is a param ount respon sibilit y of those in the English court s on the a val. Savill e J. and the Court
dealing with the of Appea l
financial aspect s of the expor t trade. decided in favou r of the plaint iffs, thoug h on differ ent
49
· groun ds, but
both courts agree d that s.56 did not apply . It is thoug ht that in a case
Avalised bills to which s.56 applie s, notic e of disho nour50 to the avalis
er is requir ed
because this is a condi tion prece dent of his liability.
9-009 An aval is the signat ure on a bill of excha nge by
a person wh~ wants
to "back '' it and to guara ntee : See _below, para.13- 009.
its paym ent to the holder m due ,s ~/~;om e~es describ ed, not very happily
course. 44 Lord Bla~kburn 45 d~scribed the term , as a quasi-indorser.
"aval" as an Lloyd': :ecis10n of Saville J. see [1988] 1 W.L.R. 1285.
41
see [l ]ei.~
990
60 sub nom. Gnmzweig und Hartmann GmbH v Irvani.
Toe case is reported in [19~11
For the CA deC1S1on
Cohn v Bou/ken 19 Savill .L.R. 667 .
(1920) 36 T.L.R. 767.
42
Barclays Bank International Ltd v Levin Brothers (Bradfor cours: ~- :e~ th at s.56 was not applica ble because the plaintiffs were not holders in du~
43 d) 'Ltd (197?] Q.B. 27 0~ AliakniOII indorser n T~ e defenda nt
Sale of Goods Act 1979 s.19(3) above, para.4--006. Cf was Liable, by
l
Leigh and S1/lav~n Lti1 oncerned, virtue of German law as a guarantor and nm as :m
Shipping Co Ltd (1985] Q.B. 350, CA; affd (1986] AC. (although th: ;~urt of A~peal held that Germa n law was the law governing ~ a,-al
785, HL (This case ~ .
however , subs.(l) , and not (3), of s.19.). On the Aliakmo iO dishonour to th 8 '"'.ere dishono ured
44 n case see above, para.2 30 in London ) and under German law no nonce of
See above, para.9-0 04. And com Ii e a~ahser was require d.
" Ia Ste,/,, M'K;n/oy (1880) 5 App.C. s. 754 at 772. Protest. P ance wi th other provisions of the Act for recours
e to the indorser, sud\ as timely
I
 ~~;~f(f~i~~
.J./'-t
Bills of Exchange
Only a time bill, and not a sight bill can b
'• ¾fr'
1;-:
Payment by Bills of Exchange
party to the bill of exchange, e.g. the d~awe e avalisect. Ai, 175
.11 is drawn in a set, each part of the set b .
0
1 b a bill himself as he is liable on thebr. 11r .th e accept °rigtnai
avalise ,,wbere. a b~ reference to the other parts, the whole of theemg numbe~ed, and
. nature, 1s
ava , y its . t h e added liability of anoth
I In anY event.,0 r, ca %01 ootaioJOg Parts constitute one
C ,,
becomes "a party" to the bill.st But their owu ti e~-~erson thoid t~ ~R .
al~ f the set may be mdorsed to different pe
party may be avalised by a third party.
As a rule, a bill is avalised only after it has ·b
a ihty of an
.
drawee. Usually, bills are avalised by banks" bµ~~~e:~eptect by th

he
tgina1
fbe part~ oaccepted by the drawee. If he is so foolishr~~~s, bu~ o~y
oe part is on more than one part and the accepted o write his
h . Ii bl
}:1
law _to that effect and anybody whose signature' carri 18 no !Ji.le,'
avahse a bill. Banks usually carry out the aval by sta' ' e_s ":~.1gh1;~/

o tance
acceP
. d
differen!te bill- In the n_orrnal case, payment of the acce
a 5epar the whole bill and the acceptor is entitled pt

parts reach
holders m ue course, e is a e on each part as if .
were
P~
t:~
bill "per aval" or similar words; this notation m\IJPJ1g •c,ro~ thi . barges
disc - f the accepte d part . o c1aim
signed by an authorised person. ' 0 C04rse, ,i,, delivel)' o
Comme~cially, the aval of a b.a nk of g?od SG\~dio i( · ,,, . tion of bills by exporter
value. It IS one of the forms of se~ur~ty which a fign .qf gre~t Negotta
.
reqmres w.h en provi.d.mg non-reco_urse finance
. to an. eXpofte,.
ance bho!~ . . 1 for the exporter as for every other businessman to t 9
It 15 vita . kl
. capital as qmc y as possi e.
"bl Th
e exporter there£
um -011 ;ii
of a forfa1tmg arran~ement _or a_ smular trfil)S~ction." 1:he charY,'l'i ver histly asks his . b ank t o ma ke an advance on the security
' ore,
the avaliser for addmg his hab1lity to the bill are likely io be'h!i~PI o of i
1· fri::ntary b_ill han?ed to t_he ba~k for collectionss or to discoun~
Avals can also be ·used in connection with the transpcirt 1
ments. Thus, if under a collection arrangemen_t the dciwmeiits.
be presented to the acceptor of the bill (who m the, sales t.ransa/tiQo
,::t d
1
0
chase bills which he 1s entitled to draw on the issuing or
P~~g bank under an accepted letter of credit56 opened by the
.! I./ ·.
a visi A bill which-bears a bank's acceptance is known. in banking I . .
will be the buyer) It may be a condit10n pr~cedent of the_release ·. f buyer.
the documents to him that he obtains a g.ood, avaL Or, con~ers,eij,0 . des as a "fine tra d e bill" . , . ;
elfin the case of advances; specific advances against individual bills
the acceptor can make the procureme~t of the ·av.al-by hiin cpndi;
tional on the documents being released to him first. This comb111a- re distinguished from. .general overdrafts allowed on security of a
!teady flow of bills-for collection held by the bank. These advances I
tion of the financial and the· documentary ..aspects .,bears: some i'
are in law in the nature of bankers' loans to customers57 ; in case of
similarity to a letter of credit transaction but It cannot_replace, t~e the exporter's failure•; the bank would be in the position of a secured
I , I
I, '1 !
latter and does not give the export seller the .s~~e finai;i.c1al creditor in respect of the documentary bills held by it and the ,1
'I
assurance as an irrevocable and confirmed letter of credit. \
proceeds thereof.
Bills drawn in a set Where the buyer has agreed to pay the purchase price under a
letter of credit, the exporter who wishes to obtain finance before
-010 It_ has been seen earlier54 that the seller usually presents thd b)lyer delivery of the · transport documents to the advising bank might
with several sets of transport documents. In this case, the sell~r c:loes negotiate the draft drawn on the buyer or the bank to another bank58
not draw the bill of exchange as a "sola" but as "parts of a set': anp for cash. Here, bankers distinguish two transactions: bills are said to
attaches a part of the bill to every set of transport documentsw~ich
he despatches. The tenor of every part fo.dicates '{hat ' tfii{ b!H
be discounted where the exporter (drawer) pays the bank's interest;
~nd they are said to be purchased where the drawee pays the ba~'s
interest and th'e exporter receives the nominal value of the b1ll. ' \
1
I

I
represents a part in a set, and states the number of parts yxis!ing 11\
:\'hethe_r a bill is purchasabl~. or discountable depends on the cla~ses
all. In the example at above, para.9-007, 'the words ''"Firs~ '0!,
~n a b1ll.59 The rates of discount are here of great practical
Exchange (Second and Third of the same date and tenor unpaid)
l~portance. In law no difference is drawn between purchased and
indicate that the bill is drawn in triplicate. The Bills bf Exc_hange Act dis counted bills.
· ' · dorse-
They are both negotiated to the bank by ~
1882 regulates this practice by providing, in s.71(1), that: ~ent and delivery of the bill and in both cases the bank which has
51 . J. m
As the avaliser is a "party" to the bill, s.72 is applicable, per Saville . G & H Montage ecome the indorsee is entitl~d to have recourse to the drawer.
52
GmbH v Irvani [1988] 1 W.L.R. 1-285 at 1295. . . the bank is '', 6 On collection a
The difference between a bank signing as avaliser and an acceptance credit by ptor but ~n.letters of ;r;i.ngements, see below, para.10-001.
that in the former case the bank, as a stranger, adds its signature _to that of th e;~~: original 11
is Oe1n & Co Ltd ;1' see below, para.11--001.
in the latter case the bill is drawn on the bank and the bank signs as one 0 thn negotiation v nl?nd Revenue Commissioners (1946) 175 LT.Rep. 453. .
parties to the bill. " S e seller, see b ~edits where the advising bank is authorised to negotiate the bill drawn by
53
See below, para.13-001. ee above p e ow, para.11-024
54
See above, para.2-021. , ara.9-007. ·
 Bills of Exchmzge Y..,ent by Bills of Exchange
Pa,,. rn
176
ne :rotiation of a. bill of exchange under a le that that which existed under the old R
•s broaderIt has been descn'b ed by Lord Woolf MR u1es of
. The f g the discount of the letter of credit it ,~tcr of 0wer I court. as
diffe rs rom 'd f d f sell "·I Crc,1•
'Or e ·erred payment 601 ,v lien 4lt 1t1 iSpuprertle
e the credit prov1 es
occur wl1er 6t • 1'his Ilia 61
is discussed in Ch.1.1. subfoi tl1' ~s: 1 to dispose summarily of both claims or defences •hie
fo!IO btes the cos°:ct of bemg su~cess[ul. The \'(ords 'no real prospect o~
. gs on bills of exchange
Proceedm ,,(I eoa real pro P eed any amphficatlon, they speak for themselves. Th _
03ve rl~ g' do not. ~es fanciful prospects of success.. ." e
i• ceedin , distingu1s
sued •real
. 11 established in English law that the courts are
9-012 It 1s we . b'll f h u11w·11· a bill of excha?ge ~ay be comJ?enced b~ the issue of
defences to actions on I s o exc ange. The hold er of1. 1ng t wor
all ow . f . d
entitled to bring an action or summary JU gip.entG2 and ~1 111 is
b' o dI·ngs on . h should 1dent1fy the parties, contam a concise
I · d 'd 'fy h
proc~1e forrn, wh1cature of the c aim an .1 entr t e remedy sought
exceptional circumstances, a. d~fendant may not establish' aave in
terclaim or set off for unhqmdated damages for breach ~ou 0• a cla ~ 0 t of the 6~ Particulars of the claim may be atta~hed to the
underlying contract. 0 the 51aterI1 ciaiJllant. eparately.69 A respondent must be given at least
Lord Wilberforce referred in one _case 63 to time bills . . bY thef rrn or sent; summary judgment hearing 70 and may file and
clairil 5~ notice ?f ~e e ly at least seven days before the hearing.71 The
Payable at future dates, as "deferred mstalments in cash'; i.e. b1\ls
that since a bill i 1onal order i.n
· is· an "uncon d't' ··
. wntmg", and said,
as,state 14 daY vidence in P0 reply if any, must be served three clear days
se!'\'~c:nt's evid~nc~2I ' •
s.3 "English law ... does not allow cross-claims, or defences d in 1
su~h limited defences as those based on fraud, invalidity or f;•tccep1 aPP e the heanng. not apply for summary Judgment until the
. · to be made,, •G4 • . 1 ure of befor claimant may ded to the claim by filing either an acknowledg-
cons1derat:1on,
73 unless the court gives permission or a
Where o?e of the partie~ to a bill of exchange defaults,, e.g._the deAfendant h~s rv1cerespondefence
or a .
acceptor dishonours the bill by non-payment, an application f rn ent .ofe s~ . n provides otherwise.
directIO
summ~ry judgment against him may n~w .be made under P..t 24 ~~ practlC
65
the Crvil Procedure Rules 1998. The prmc1ple that :set off was not
available in respect of bills of exchange and letters of credit
continues to apply under the new Rules. 66 ·
Under CPR r.24.2 the court has power to give, summary judgment
against a claimant if it considers that: · · .. ,
(a) the claimant has no real prospect of succeeding on the claim or is'sue· and
0
/ ••, ( . )
, J
(ii) the defendant.has no real prospect of successfu~y,defenc;ljng ~he clairp or
issue; and ; ·
trial.there is no other reason why the c~,se or issue
(b) should be c:fisposed of at a
'"° See
See European Asian Bank AG v Punjab & Sind Bank (No.2) (1983] 1 W.L.R. 642.
below, para.11--024,
62
st
Mo other countries provide also for summary proceedings in case of default under a bill of
exchange.
~ ~ra (Jersey) Knit Ltd v Kammgam Spinnerei GmbH [1977] 2 All E.R. 5?3, CA
s rule has now been extended to include direct debit instructions which are regard ed as
65
~'.~v;~et~tcheques: Essa Petroleum Co Ltd v Milton (1997] 1 w'. L.R. 938, [1997] 2 All
TI1e statement in the · , &
J~;1
1
s ~upported by reference to the following case_s: Jam e1 Lat/WIil
Co Ltd v Hyland L d
5
Lloyd's Rep. 668 : 0 No~! l KB, 85; _Brown Shipley & Co Ltd v Alicia Hosiery Ltd [196 6 1
W.L i
1
71 3; [1977] 2 AUER 463 irsey) Kmt Ltd v Kammgarn Spinnerei GmbH (1977] 1 61
Ltd v National Bank ~f K~ . · See also Lord Denning M.R. in Power Curber I111ematw11? PR Ptv Hillmann
Swain
ij C 16 (2002] 1 All E .R . 91 at 92.
National Bank & Trust Co waa SAK [l981] 2 Lloyd's Rep, 394 at 398; Co11ti11ental II/mots
f : PDJ6 para:3.
:j}
Paul Papanico/aou· Th e Fedora, Tatiat1a am)/
Eretrea 11 [1986] 2 LI d' 441 v John
C!ucago
~PR r.24.4(3).
,,, para.34-097. oy s ep. at 445; see further Chitty, Comracts (29th edn, Z004 ' 11
See Safa Ltd v Banque du C . n PR r.24.5(1).
a1re [2000] 2 Lloyd's Rep. 600 at 606. ~ CPR r.24.5(2).
CPR r.24.4(1\
 ~
T The U11ifom1 Rules JO, Collectiom
l79
niform Rules, which do not have the f
..,.,he U orate d b th art· .
0 -lA'PTER 1Q e-J l y e p ies lllto their contraorce of law.,
t s Thi
,T,rt,e'C t" if incorpularlY in the interaction between thee . . ~ is
{l11
0 rt , paruc Li ' d th . rem1ttmg
I'll}' done, d by the se er, ~
•
e collectmg bank, whi
l'~drelY . struct~ the buyer at hIB place on the instructions f thch
COLLECTION 1-\RRANGEMEN'fsi 1vt 1o btll to •· b o e
,tirtJc· s the S ecific prov1S1ons may e exc1uded expressly b the
I -eot bank- p d y
11re;_ ·og quire · :J:
r. 10 ,ttl ·t· 50 re .,;.,jon of the Unuorm Rules,6 considerably
Para. rt; •es I t revw . • d' •d d • more
The Unifom1 Rules for Collections 10-002 •1,t1 curren ·ts predecessors, JS lvt ~ . mt~ seven Parts. Part A
Delivery of docurn t 1
Dishonour . . . • . • . . • • . . . . . . • . . . . . 10-003 . ens cont P 'fl~e d th811 Provisions and Defirutions , of wliicfi'·the follow-
mstructions . . . . . . . . . rary 10 ~,r,_ t:l1le ,,oenera1
.... l¾ii de
.0 o
05
tai of in · tereSt · " means the han dling by banks •
) "Collection
~11 g arde r f\[t.2( a_ stn1ctions received, of documents in order to-' Ill
10--001 ·where the parties have not arranged for payment f ·...,-ro e
/u nee .,11th
vv •
tn ·
- .
price to take place in the seller's country the prob~~be _Purchase cco rd3
3 . ayroent and/or _acceptance, or
who is to present the bill of exchange drawn by th anses as t ''(i) obt~n Pdocuroe:ots agamst payment and/or against accept-
buyer at his res1·dence an d, 1'f 1t· 1s
· a documentary bill
e seller on th0
2
.. deliVer
deliver the transport documents to him when he accept ' Who is t~ (u) ance, ord uroents on other terms and conditions."
draft? Normally the exporter asks his bank to arras or Pays the ... deliver oc
collection of t~ e, i.e. t e acceptance or p aymen . ~ge for the (ill) ) "Documents" means financial documents and/or
0 f\!12(b ,
the bank will carry out this task through its own~ , and ai
under . documents: .
or a correspondent bank ~ the 6uyer'~ b r o a d 111erc1
entrusts these duties to his representative or ✓;ub~idi;;~~ the'sel!~r colll . . documents' means bills of exchange, promissory
1 1
he is represented at th~ buyer's .place of business, ~P:y, ~ ''(i) 'f111an~ :eques, or other similar instruments used for obtain-
0 notes, a ent of money;
forwarders. his
The seller's instructions to present for acceptance or for pay ing the P ~ documents' means invoices, transport docu-
the bill drawn for the price will pass through many hands andme~j (ii) 'Comro~rciuroents of title or other similar documents, or any
have to be ~arried out ~broad. 1:hey m_ust _be _precise and c~:e roents, odccuroents
0
whatsoever, not being financial
other
and deal with the vanous contmgenc1es which may arise in th documents."
course of their execution. The banks ask their customers to issu:
. " defined at Art.2(c), means "collection of
instructions ·on a documentary bill lodgment form which is designed to
A c~
" l an coll ect ion , . by commerc1a . I documents": A
obtain instructions for all eventualities. ts not accompamed
financial_docuroe~ f on'; defined in Art.2( d),' means the collection
In modern practice the documentary bill lodgment form is "documentary co e~ 1 ,
arranged in a tabular manner. The table contains all contingencies of:
which occur in the--orthnary course of business, and the customer is
requested to complete the form and to tick off the instructions which "(i) Financial documents accompanied by commercial
he wants to give the bank. This layout is followed by a space in which document~;
further instructions may be given if desired. 3 (ii) Commercial documents not accompanied by financial
documents."
The Uniform Rules for Collections J l 1996 See also the/CC Uniform
' ICC Brochure No.522. These took effect as from Nan;;z a~d th~ ICC Guide to Collection
Rules for Collections: A Commentary (Brochure J1iili
rm Rules for Collections should not
10--002 Banking practice relating to collection arrangements is standardised Operations for URC 522 (Brochure No.561). The . f O Documentary Credits; on the latter,
be confused with the Uniform Customs and Pracnc~ ~r . hich banks have indicated
by the Uniform Rules for Collections (1995 Revision), a globally· see para.11--004. Details of countries and_ temton:la~l/from the ICC. Their website
recognized set of rules sponsored by the International Chamber of adherence to the Uniform Rules for Collecnon are av
may be found at http://www.iccwb?.org. C lion do not apply when documents
' URC Art.l(a). Note that the Uniform R~les for O11ec .
1
See generally Benjamin (7th edn, 2006), Ch.22, para.22--067 et seq. are negotiated under a documentary credit . d. with revisions a p ~ m
2
On documentary bills of exchange, see above, para.9--008. ' i.e. URC 522. The Uniform Rules were first publishe 10 1956 '
3
See, e.g. SITPRO standard form collection request, widely used. 1967 and 1978.
180 11. Collection Arrangements r:~ ~
In the lat . The Unifonn Rules for Co
ter typ e of do cu me nta ry co lle cti s th
llections
me nts are pr es en ted on
\
181
by the co lle cti no ba rou st no tif y "b y tel ec
wi th th e fin an cia l do nk t e hcomrnerci l cas o~ un ica tio n or if
cu me nts . It is thi s typ O e the Y eY ne tha t is not
me nt wh lch is of e ft e buyer ~ d~ - 111e otb ef nr- ditious me an s, wi tho ut delay", the party fro
int ere st to th e ex po rte r. 0 0 11ot . \e. bY cti on ins tro ctm •
n wa s receiv . d, ·ct . fug
- m
Pa rti es to the tra ns ac collec tia ~ a e 1 entify
tio n are de fin ed in Ar &t\ht1 posS1ft1b ,l.e
u•
colle ,m ch ar e fo un d to be oth er than
any docu-
,v\1° ts misSU· a or .-.
0
t tt.\n listed. The
(a) Th e «p rin cip al" ·3 as follaWs: .~i lo
tlletlectillg ?a nk ed iat ely
rou st ad vis e th~ re ~t
• .
tm g ba nk _of the fate of the
(A rt. 3( a)( i)) , is the Pa 10; an d thi s adVl~e mu
" en tru sti ng the ha nd rty ( c0\\ cuon 1rnro •ttina bank stn mc lud
lin g of a co lle cti on to mu st specify the metho e appropriate
~~ally :he Sl!\\er cO\\e·is ,f"\,
i 1.•e
retOl
eno fai. lin d by which such
(b) Th e " dr aw ee" (A rt. 3b ) is the pa rty "to !riv .
g w hich the coUect.ing b
wh auk' · de~ce. is to be t~ em plo ank may choose
to be ma de in ac co rd ) y. Oa us e 26(c) contemp
an ce wi th the collecti?m ad ·cb me tho d dvi lates three types of
~resentation . · ce of pa ym en t, advice of accep
(c) Th e " co lle cti ng on ms tru . ~
adVlce, nf fl~ a tance 12 and advice
ba nk', o ther th th
ba nk " (A rt. 3(a )(i ii) ), is sta t d Cho ts
n."
ncu ... en t an d/o r ac ce pta nc e c·i.e di h
. s on
an e rem · · f non-payIIl t sh ow (a) ou r). The advice of
e
th e co lle cti on" . itt ing ba nk , inv olv d · ta be ,.·any \ylllent rous the su m collected;
(b) charges
e m PtOCessing
an d/o r ex pe ns es an d, (c) if appropriate , the and/or
~·sburseroents th tunds methods
(d) Th e :'p res en tin g
ma kin g pr es en tat mn
~a nk" (A rt. 3(a )(i v))
(of the do cu me nts }to
is " the collectin ;f disposal ?~ .13
:em pt s banks fro m
liability for the form,
the dr aw J,~ank ;\.ftide. i., eses of th e sufficiency
Ulllen do cu me nts . By Art.1
Th e Un ifo rm Ru les and gen _ ili for 4 they are exempt from
pro vid e7 th the co ns eq ue nc es o f va no . us
,,<Ti- b at
mlU )l e ac co mp am. e dby " ll .all do .
cu me nts sent for call . re,sp~o sib t¥t of me ssa oe s an d the lik e, an d als
events such as delay ,
a co ec tm n ms tru ctm . ection o from responsibility
Ru les an d giving co n" inc orp ora tin th
\oSS Ul tra fiS l us ed by th e ne ed to ob tai n clarifica
mp let e an d pr ec ise-in tion of instructions
?a nk ~a y only .ac t structions. Th e ca ll~ for ~e lJ {: ad dit ion
up on ins tru cti on s co ~ , ba nk s do no t ac ce pt respo
ms tru ctl on . 8
Ar !ltain~d in this callecti~ receive : ·ty of sig na tur ~ibility for the
tic le 4(b ) set s ou t the de tai ls authentlCl es on bil ls of exc ha ng e, pronn
in ea which must be included ssory notes, or
ch ins tru cti on an d sta tes tha t it must. ide similar documents. is
dra we e, the rem itt ntify the principal, the
ing ba nk an d the pr es en hn g bank.
cle arly the am ou nt ap_ It should state
d cu rre nc y to be co lle cte d, list Dishonour
ing do cu me nts , the ter the a~mpany-
ms of th e de livery of the docu
wi th any oth er ma tte ments, togeth er
rs relah ng to- mt ere st Specific dir ec tio ns sh
ho w pa ym en t is to be and charges, and state ou ld be inc lud ed in the collec
ma de an d wh at steps to the ste ps to be tion instruction as 10-00
ev en t of dis ho no ur. are to be taken m the tak en by th e collecting nker 3
dishonour of the bil l ba in the event of
--n r-t he case of a do cu me nta ry co lle cti on , the ex ~~ cti on s rel ati ng
of ex ch an ge . Th ese
should provide precis e
the rem itt ing ba nk porter must instruct to th e no tin g or pro
an d the lat ter mu st ins tru ct the rn lieu) wh ere the bil tes t (or other legal proces
to wh eth er the collecting b~ as l of ex ch an ge is dis ho s
do cu me nts sh all be delivered to or non-payment.16 In th no ure d by non-a cce pta
ac ce pta nc e the buyer on e ab se nc e of su ch ins nce
of the bil l (D IA ter ms ), on ac tua l paymen ob_liged t_o have th e do truction s, ba
or in ac co rda nc e wi th cu me nts pro tes ted . No nks are no t
sp ec ial ins tru cti on s (w ( (D/P terms), ting me
mm ute .on _the an s ob tainin
on the for m) . Ins tru
cti on s mu st also )Je
hich have to be stated
accept
oil l by a no_tary pu bli c aT lli eti
me of
g a
do cu me given as to wheth~r :: anc e o_r pa ym en t. Th e mi nu te which is da ref usa l of
nts sh all be ha nd ed to a representati the no · · ted and ini
ev en t of ve in case of need9 lil tary 1s, m pr- ac tic e a suffic ' · tia lled by
no n-p ay me nt an d/o r no n-a cc ep tan ce , concerned ien t assurance for all par ·
of tha t rep an d what the pow~~ tha t the bil l ha s 'be en dis ho no ure ties
res en tat ive are , wh eth er the bu ye r d, an d only in particular
reb ate for shall be allowe not ~~~i~for ~t an ce wh en
pa ym en t be fo re ma tur ity ; an d, the do th e ma tte r lea ds to liti
tak en up , wh eth er if cuments ~rewbat la req
uir ed to pr oc ur e gation,
is the no t~
insura nc e is
the goods are to be
warehoused an w, where a bill ha s be en a for ma l pro tes t. Acccording to Engbsh
to be eff ec ted no ted 17 on the day of
By Ar t.1 2(a ), a ba nk mu. ba,,e
dis honour or tbe
receiv st est ab lis h tha t the ~o l,) UR.c .
ed ap pe lis ted in the collection cume~ts t~~uch is
,
ar to be as n URc Art.26.
mstruction. 11 Cf Art.26(a).
Lrd. the earlier
v Afrib pos. .
itm n
7 At Art.4(a)(i). und er UR C 3'>? as expressed by
8 Un der
Art.4(a )(ii ) ban ks will .
,IJ UR
1 ., C Art .2ank Ni .
,c)r )ge na ...,_,
Ltd £199511 Llo
.
Longmore J. m f.fmone. s Fmanre
not examin . clioOS -
und er Art.4(a )(ii.i) ban
e doc
ks are to disr egard any
um ent s in ord er to obtalll ins : r than and "-ellectin 6' 'I . yd' s Rep . 134 .
1he 15 UR. g Art.
one from wh om they instructions given by any 15 URC Arts 34 Of U
receive the collection. partY O e 22 and CP 600 and Art.15 of
9 U
RC Art..25 . ll C Art.14 UC P 500.
23.
See abov - .
e, Para.Cl-.f\n ,,