bill of exchange (BOE)

Definition

Written, unconditional order by one party (the drawer) to another (the drawee) to pay a certain sum, either immediately (the sight bill) or on a fixed date (the term bill), for payment of goods and/or services received. The drawee accepts the bill by signing it, thus converting it into a post-dated check and a binding contract. It is also called a draft but, while all drafts are negotiable instruments, only 'to order' bills of exchange can be negotiated. According to the 1930 'Convention Providing A Uniform Law For Bills of Exchange and Promissory Notes' held in Geneva (also called Geneva Convention) a BOE contains: (1) The term 'bill of exchange' inserted in the body of the instrument and expressed in the language employed in drawing up the instrument. (2) An unconditional order to pay a determinate sum of money. (3) The name of the person who is to pay (drawee). (4) A statement of the time of payment. (5) A statement of the place where payment is to be made. (6) The name of the person to whom or to whose order payment is to be made. (7) A statement of the date and of the place where the bill is issued. (8) The signature of the person who issues the bill (drawer). BOE is the most often used form of payment in local and international trade, and has a long history-as long as that of writing (which was invented by accountants for recording trade transactions)—going back over 5,000 years.