A Bill of Exchange is something that reduces our credit risk, Let’s understand this concept better with the help of an example; Omkar being the seller sold goods worth Rs 10,000 to Ishaan being the buyer on credit. In the given case, Omkar has sold goods to Ishaan believing that on some future date he will make payment. Now, we can analyze that Omkar is a little skeptical regarding the certainty of receipt and time of such payment. In order to set an exact date of payment and to make his transaction legally valid, Omkar will draw a document in writing. Such a document is called Bills of Exchange. The main features of the Bill of Exchange are discussed below
Features of Bill of Exchange
- It is an unconditional order directing a certain person to pay amount specified in it.
- It is always inwriting.
- It is drawn and signed by the Drawer of the bill.
- This amount isto be paid either to person whose name is specified in the bill (Drawer) or on to order of that person (Endorsee) or bearer of instrument.
- It should beaccepted by buyer.
- It also specifiesexact datetill which amount is to be paid.
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