Ask a Teacher

Section 5 defines a bill of exchange as “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to order of, a certain person or to the bearer of the instrument.” A bill of exchange is also called a draft.

There are three parties to a bill of exchange, namely drawer, drawee and payee. The maker of the bill is called the drawer, the person who is ordered to pay is called the drawee and the person to whom or to whose order the money is directed to be paid is called the payee. In some cases drawer and payee may be one person. The payee, or if, it is endorsed; endorsee is called the holder of the bill. The drawee of a bill of exchange who has signified his assent to the order of the drawer is called the acceptor. The acceptor becomes liable to the holder only when he has communicated his assent but not before.