Hand Out 21-F

(Session 22)

Bills of Exchange

A bill may be payable (a) on demand (payable upon presentation; must be

presented for payment within a reasonable time after being received by the holder), or
(b) on or before date (payable not later than the date indicated, though may be paid
before that date), or (c) after a certain time after sight (payable after expiration of the
time indicated following presentation), or (c) the happening of a certain event (payable
upon the happening of the event indicated).

The holder may negotiate the bill by endorsing it to a third party. In this way,
the bill may be passed from hand to hand, until the time when the period of the credit
has expired (and the bill is said to have matured), when the holder of the bill at the time
can obtain his money from the drawee.

The drawer/endorsers become liable to compensate the holder for any loss
suffered by him in the event of the bill receiving a qualified or partial acceptance from
the drawee or being dishonored. (See Negotiable Instruments Act, 1881, Section 30(1)
(a).)

Since general acceptance by the drawee to pay at maturity makes him liable,
presentment to him for payment is not necessary.

When a bill is dishonored, the drawer/endorsers must be informed within a

reasonable time. Reasonable time means, if person to whom notice sent lives in the
same place, notice is sent so as to reach him the next day after dishonor; or, if lives in a
different place, it is sent off to him the next day after dishonor. In practice, the holder
notifies the previous endorser, who notifies his previous endorser and so on till
everyone who is liable on the bill has been informed.

A person is appointed notary public by the provincial government under the

1881 Act, their main function being to authenticate documents/contracts, keep them
in safe custody, and to provide copies to the public if wanted.

A foreign bill is a bill drawn or made in a foreign country, or made payable, or

drawn upon a person resident, in a foreign country.

An inland bill is a bill drawn or made within the country (Pakistan), and made
payable, or drawn upon a person resident, within the country (Pakistan).

Payment in due course means (a) in accordance with the apparent tenor of the
bill, (b) in good faith, (c) without negligence to any person who has possession of it,
and (d) in circumstances that do not offer reasonable grounds for believing that such
person is not entitled to receive payment of the stated amount.
 With regard to discharge of bills of exchange, for details, see Khawaja Amjad
Saeed.