Legal sources regulating the circulation of B/E- National Law+ The Bills of Exchange Act 1882 BEA 1882: The United Kingdom sets out thislaw in detail the requirements for the form of a b
UNIVERSITY OF ECONOMICS AND LAW FACULTY OF INTERNATIONAL ECONOMIC RELATIONS MID TERM REPORT INTERNATIONAL PAYMENT BILL OF EXCHANGE AND PROMISSORY NOTE Lecturer : Nguyen Thi Quynh Nga 231NH0401 Class code : 5 Ho Ngoc Phuong Uyen Group : Nguyen Uyen Nhi Nguyen Ha Hai Yen Members : Le Phuong Thao K214021505 Nguyen Ngoc Thao Nguyen K214021230 Pham Anh Minh K214020186 K214020183 K214020180 K214020176 Ho Chi Minh city, 14 October 2023 TABLE OF CONTENTS Section I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 I BILL OF EXCHANGE 1 2 Section I BILL OF EXCHANGE Bill of Exchange have had a long history Initially, there were only “promissory note” created by debtors and given to creditors as documents committing to paying the corresponding value at a different location using the currency accepted there By the 16th century, “bill of exchange” emerged as documents created by creditors sent to debtors, requesting payment From that point, they became widely used as means of payment and credit in domestic trade within each country and in international trade 1.1 Legal sources regulating the circulation of B/E - National Law + The Bills of Exchange Act 1882 (BEA 1882): The United Kingdom sets out this law in detail the requirements for the form of a bill of exchange and accordingly should be consulted prior to any detailed consideration of a bill of exchange + The Uniform Commercial Code of 1962 (UCC): This is a collection of proposed model laws, drafted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws, that are meant to serve as a guide for state legislatures when they draft statutes involving commercial contracts and related dealings + Law on Negotiable Instruments 2005: This Law applies to Vietnamese organizations and individuals; foreign organizations and individuals participating in negotiable instrument relations in Vietnam, regulating negotiable instrument relationships in issuance, acceptance, guarantee, negotiation, pledge, collection, payment, recourse, - Regional Law + Uniform Law for Bills of Exchange – Geneve Convention 1930 (ULB 1930): France joined the Geneva Convention in 1930, but officially applied the ULB law in 1930 Vietnam was a French colony at that time, so it has also applied this law from 1937 until now Therefore, to explain bills of exchange in our country, we should only rely on the ULB rather than other legal documents because of the dominance of ULB around the 3 world Today, the Uniform Bills of Exchange Act 1930 is in force in all European nations (except the UK) Many other countries, although not participating in the Geneva Convention, still build their Bills of Exchange Laws compatible with the ULB 1930 - International Law + It is the combination of national law and regional law + This type of law is rarely applied, which is only used for reference 1.2 Definition The countries participating in the 1930 Geneva Convention could not reach a consensus to define a bill of exchange, so the regulation adopted the BEA 1882 as the definition of a bill of exchange A “bill of exchange” is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed determinable future time a sum certain in money to or to the order of a specified person, or to bearer Each of these elements needs explanation: (1) “unconditional” means that no conditions are allowed (i.e a bill with a clause “If the goods are shipped by October 14, the payment will be made” is not a valid bill of exchange) (2) “in writing” included hand-writing, typewriter, and printing (3) “in addressed by one person” refers to a drawer (4) “to another” refers to the drawee who is to make payment (5) “on demand or at at a fixed determinable future time” means either: to pay immediately (to pay at sight) to pay at a fixed future time (i.e pay on November 1) to pay at a determinable future time (i.e 60 days after the date of drawing the bill) 4 (6) “a sum certain of money” means that the amount is payable in the form of money rather than a commodity or any other means (e.g a sum of $10,000 in money) (7) “to or to the order of a specified person or to bearer” means that the payee is stated in either: to a specified person (i.e “to X Co Ltd ”) to the order of a specified person (i.e “to the order of X Co Ltd” to a bearer (i.e “to a bearer” or to ) According to the BEA 1882, a bill is not invalid by reasons: (1) it is not dated; (2) it does not specify the value given, or that any value has been given therefor; (3) it does not specify the place where it is drawn or the place where it is payable A bill of exchange is a valuable instrument in the international trade, serving as a facilitator for transactions between importers and exporters While it doesn't constitute a standalone contract, it functions as a tool enabling the involved parties to delineate the specifics of a transaction This includes the establishment of credit terms and the determination of the interest rate that will accrue Bills of exchange are also useful in international trade because they help buyers and sellers deal with the risks associated with exchange rate fluctuations and differences in legal jurisdictions 1.3 Parties - Drawer: The drawer is the maker of the bill They draw or writes the bill and they sign the bill Although a bill can be accepted before receiving the drawer's signature, their signature is required to complete the document The drawer is not necessarily the first beneficiary but is responsible for paying the final payment to the beneficiary if the bill of exchange is refused payment by the drawee 5 + Right: to benefit from the amount stated on the bill of exchange; to transfer the bill of exchange to another person by endorsement; to be noted and protested if unpaid or not accepted + Obligation: In case the bill of exchange is dishonored, the person who issues the bill of exchange is responsible for returning the money to the beneficiary - Drawee/Acceptor: The drawee is the person upon whom a bill of exchange is drawn, or the drawee is the person who accepts the bill and promises to pay the amount When the drawee accepts the bill, he becomes the acceptor + Right: to refuse payment if the bill of exchange is found to be invalid or if you feel that your rights have been violated (the amount on the bill of exchange does not match the value to be paid) + Obligation: to check the validity of the bill of exchange before payment (e.g legal signature of the drawer); to pay according to the provisions (i.e according to section 17 BEA 1882, the drawee has no liability on a bill of exchange itself until they accept the bill, becoming an acceptor who is primarily liable to pay); to sign and accept payment of the bill of exchange upon seeing the bill of exchange if it is not a sight bill of exchange - Beneficiary: is the legal owner of the bill of exchange, and therefore has the right to receive payment of the amount stated on the bill of exchange Depending on the circumstances, the beneficiary may be: the drawer, banks or someone designated by the drawer If the drawer keeps the bill with themselves until the due date and receives the amount of the bill, then the drawer and beneficiary both are the same person + Right: to receive payment and transfer the right to benefit to others; to request payment from the drawer if the bill of exchange is invalid; to complain before the law if the bill of exchange is valid but not paid + Obligation: to check the validity of the bill of exchange; to present the bill of exchange for payment at the designated place 6 Document continues below Discover more fTrhoamn:h toán quốc tế TTQT01 Trường Đại học Kin… 159 documents Go to course 869 cau trac nghiem va bai tap tinh huong… 233 100% (10) UCP 600 - tieng viet - UCP 600 bản tiếng… 35 100% (6) Ielts Speaking Review - Vol 5 100% (1) 29 Socio- economic… Trading HUB 3 Xác suất 96% (28) 36 thống kê File giáo trình bản pdf HSK 2 100% (11) 8 Giáo trình chủ nghĩa x… Individual 2 100% (10) 3 Kinh tế vi mô Fig 1 Bill of exchange flow - Endorser: The person who benefits from the bill of exchange gives up ownership of that bill of exchange to another person by endorsement The first person with the right to transfer is the seller - Holder in due course: A person or business that has acquired the bill of exchange for value and in good faith The main duty of a holder is to present a bill promptly for acceptance and/or payment and to note and protest in case of non-acceptance or non- payment, which must be immediately notified to the drawer or endorser to retain the recourse right - Drawee in case of need: When in the bill or in any indorsement thereon the name of any person is given in additional to the drawee to be resorted to in case of need, such person is called a “drawee in case of need.” (The Negotiable Instruments Act, 1881) 1.4 Characteristics - Abstractness: the bill of exchange does not need to show the credit relationship between the drawer and the drawee A bill of exchange is a separate and independent instrument from the underlying contract or transaction (e.g a sale contract) for which it is created In other words, it can exist and be transferred independently of the original transaction or 7 the goods/services it represents This abstractness allows for flexibility in using the bill of exchange as a means of payment, as it can circulate through various parties - Mandatory: A bill of exchange is an unconditional order to pay, not a demand for payment Therefore, it is required that the person responsible for paying must pay the full amount according to the deadline specified in the bill of exchange and must not refuse, delay or give reasons for not paying, except in cases where the bill of exchange is invalid - Convertibility: A bill of exchange is a negotiable instrument, and it is typically transferable from one party to another within a certain period through endorsement (signing on the back of the bill) and delivery This means that the holder of the bill can transfer their rights to receive payment to another party by endorsing the bill, effectively making it payable to the new holder This feature enhances the bill's liquidity and ease of use in trade and commerce 1.5 Classifications 1.5.1 In terms of time of payment - At sight Bill of Exchange: is a type of bill of exchange that requires the drawee to pay the holder as soon as he sees the bill In international trade, a sight draft allows an exporter to hold title to the exported goods until the importer takes delivery and immediately pays for them - Time or Usance Bill of Exchange: A time draft gives the importer a short amount of time to pay the exporter for the goods after receiving them The drawer of the bill of exchange can stipulate the time limit for payment of the bill of exchange in the following ways: + pay at a specific date in the future (i.e pay on November 1) + pay after a certain period of time from the date of drawing the bill of exchange (i.e 60 days after the date of drawing the bill) + pay after 1 certain period from the date of delivery; 8 1.5.2 In terms of attched commercial documents - Clean Bill of Exchange: is a type of bill of exchange in which payment is not accompanied by commercial documents (goods documents) It is also used under the methods like Open account or Clean collection - Documentary Bill of Exchange: is a type of bill of exchange accompanied by commercial documents The payer must pay the bill of exchange or sign an acceptance of payment on the bill of exchange before receiving commercial documents 1.5.3 In terms of convertibility - Nominal Bill: A type of bill of exchange that clearly states the name of the beneficiary It means that only the beneficiary can receive the payment and cannot transfer to other people by endorsement - Order Bill: is a bill of exchange with the words "pay to the order of " (pay to the order of ), this bill of exchange is transferable in the form of endorsement, so it is commonly used in payments - Bearer/ Nameless Bill: A type of bill of exchange that does not have the beneficiary's name written on the front of the bill, but is only returned to the holder For this type of bill of exchange, whoever holds it will be the beneficiary This type is freely transferable from one to another 1.5.4 In terms of drawer - Bank draft: A bill of exchange issued by the bank ordering the correspondent bank to pay a certain amount of money to the beneficiary specified on the bill (bank draft cannot be transferable) - Commercial draft: Drawn by the exporter, the lender demanding money from the importer or the bank opening the L/C 1.5.5 In terms of acceptance status 9 + The drawee shall carry out the acceptance of a bill of exchange by writing in the lower left corner of the right side on the front of the bill of exchange the word "accepted", the date of acceptance and his/her signature - Purpose of accepting a bill of exchange: + Helps bills of exchange circulate as a special form of currency + Binds the responsibility of the payer (person accepting payment) before the law when payment is due 1.8.2 Endorsement Endorsement is a procedure for transferring a bill of exchange from one beneficiary to another beneficiary Beneficiary transfers his ownership of the bill of exchange to the assignee by endorsing on the back side of the bill of exchange and transfer the bill of exchange to the assignee The assignment by endorsement shall be applicable to all types of bill of exchange, except for the nonassigned bill of exchange - There are the following main ways of endorsement: (1) Blank endorsement: A type of endorsement that does not specify who the next beneficiary is The endorser only signs his name With this type of endorsement, the transfer of the bill of exchange can only be done by exchanging hands, without the need for subsequent endorsements The person holding this bill of exchange will have the right to benefit from the bill of exchange (2) To order endorsement: (3) Restrict/ Nominated endorsement: An endorsement that specifically names the next beneficiary and only that person (i.e “Pay to Mr………only”) With this type of bill of exchange, it cannot continue to be transferred to another person by endorsement 14 (4) Without recourse endorsement: It is an endorsement after which the next beneficiary does not have the right to claim money back from the endorser when the payer (debtor) refuses to pay - Principle + The endorsement of the BE is the assignment of the entire amount of money stated on the BE The endorsement of one part of the amount stated on the bill of exchange shall be invalid + The endorsement of BE to two persons or more shall be invalid + There must be unconditional Any condition companied with the endorsement shall be invalid + The BE, which is overdue or refused to be accepted or refused to be paid, shall not be assigned 1.8.3 Aval/ Guaranty Guaranty of bill of exchange means a third person (hereinafter referred to as the guarantor) makes a commitment with the guarantee to pay one part or entire of the amount of money stated on the bill of exchange upon its maturity where the guarantee fails to make payment or makes insufficient payment - Principle: + Guaranty is unconditional + Guaranty to pay one part or entire of the amount of money stated on the bill of exchange is legally allowed + The guarantor is not the person paying the money, not the person signing the bill of exchange, but is usually a large, reputable bank 15 - The form of guarantee is made by writing the word "guarantee" (aval) on the front or back of the bill of exchange, and the guarantor will sign the bill of exchange 1.8.4 Protest for non-payment When a bill of exchange is refused payment, the current beneficiary on the bill of exchange has the right to make recourse from the drawer or his previous assignor and to protest against the payer before the law In the event where the acceptance or payment of the bill of exchange is refused, the beneficiary must give a written notice to the drawer, his assignor, and/or their guarantor of that refusal The purpose of the protest is to ensure the rights of the beneficiaries 1.8.5 Discount A bank's lending operation by buying back term bills before maturity to help businesses get money immediately The value of money that a business receives from the bank when discounting a bill of exchange is always smaller than the actual value of the bill of exchange because the difference in value is the bank's discount yield - Conditions: + The bill of exchange must be accepted before discounting + The beneficiary has to transfer his ownership to the bank by endorsement - The achievement of discounting a previously discounted coupon is called rediscounting 1.9 Advantages and Disadvantages - Advantages + Legal evidence: A bill of exchange is a legal document; therefore, it is a legal evidence of the debt As such, the drawer can sue for the recovery of the B/E amount 16 + Specific amount and date: A bill of exchange is signed by both parties For this reason, both parties are aware of the amount of the bill and its due date + Discounting facility: Another advantage of a bill of exchange is that it can be discounted if the drawer or holder needs funds before the due date The bill can be sold to the bank to receive the total amount in advance + Negotiable: Negotiable means transferable A bill of exchange payable to the bearer can be transferred from one person to another for the settlement of debt + Drawee enjoys full credit period: The drawee is bound to pay the amount of the bill on the due date They cannot be compelled to make the payment earlier Therefore, the drawee enjoys the full credit period + Easy remittance: A bill of exchange is a negotiable instrument, just like a postdated cheque Therefore, it can easily be remitted from one place to another - Disadvantages + Assets are restricted + The market is unoriginal on the grounds that a bill of trade can be re-limited ass long as they can be negotiated before the due date or paid up in full + Can benefit just huge organizations Section II PROMISSORY NOTE Promissory notes have had an interesting history At times, they have circulated as a form of alternate currency, free of government control In some places, the official currency is in fact a form of promissory note called a demand note (one with no stated maturity date or fixed term, allowing the lender to decide when to demand payment) 17 In the United States, promissory notes are often used in when getting a mortgage, student loan, or a loan from a friend or family member They're also sometimes issued to corporate clients 2.1 Definition According to clause 83 in Bill of Exchange Act 1882 (England), promissory note is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person or to bearer According to the US Uniform Commercial Code (UCC) defines that an instrument is a “note” if it is a promise and is a draft if it is an order 2.2 Parties - Maker/ Issuer: The maker of the promissory note is the party who issues the note and makes the promise to pay a certain sum of money to another party (the payee) or to the bearer of the note, usually the buyer or importer The maker's commitment to repay the amount is a legally binding obligation - Payee: The payee is the party to whom the payment specified in the promissory note is to be made, usually the seller or exporter The payee is the recipient of the funds when the note matures and the maker fulfills their payment promise The payee can be an individual, a business, or any other legal entity Fig 5 Promissory note flow 2.3 Main contents (1) Name of the promissory note 18 (2) Serial number of promissory note issue (3) Amount of payment (4) Date and time of issue (5) Payment time (6) Place of payment: name of the financial institution or issuing bank (7) Name of the payee (8) Maker/ Issuer Buyer is an individual: Full name, ID card (still valid), address Buyer is an organization: Organization name, establishment license number, business code, business registration certification stamp (if no business code is available), address (9) Signature of the legal representative of the issuing unit and other signatures prescribed by the credit institution or bank branch (10) Some other contents are decided by the financial institution or issuing foreign bank branch Fig 6 Samples of promissory note in international trade 19