The report commercial documents bill of exchange

In addition, drafts are also used as a means of credit circulation when the bill of exchange is discounted at a bank or when it is circulated from person to person.. During the validity

THE FACULTY OF BANKING AND FINANCE

-THE REPORT

COMMERCIAL DOCUMENTS: BILL OF EXCHANGE

LECTURER : MASTER NGUYỄN THUỲ LINH CLASS : 2145A05 - INTERNATIONAL PAYMENT MEMBERS : TRẦN THỊ NGỌC HUYỀN

TRẦN ĐỖ THANH LAM

VŨ THỊ NHẬT LINH _ LEADER TRẦN YẾN LINH

LÊ QUỲNH MAI NGUYỄN ANH THƠ

HA NOI, 2022

EXECUTIVE SUMMARY……….……….…2

1.The process of formation and development……… ….… 3

2.Meanings and parties to Bills of Exchange……….….3

2.1 Meaning……… …3

2.2 Parties to Bills of Exchange……… …….3

3.Mandatory content of bill of exchange………4

4.Features of Bills of Exchange……….………… 7

4.1 The abstraction of bills of exchange……… 7

4.2 Mandatory payment the bill of exchange………7

4.3 Circulatability of bills of exchange……….…7

5.Types of bill of exchange……….……….8

6 Transactions related to bill of exchange……… 8

6.1 Draw bill of exchange………8

6.2 Acceptance……….8

6.3 Transfer of bills of exchange……….9

6.4 Bill of exchange guarantee……… 10

6.5 Pledge and collect bills of exchange……… 11

6.6 Protest for Non-payment……… 11

6.7 Discharge……….11

CONCLUSION……… ………12

EXECUTIVE SUMMARY

Bill of exchange is an important factor in international payment Bill of exchange is a commonly used payment method in import and export and is often associated with international payment methods such as L/C or collection entrustment In addition, drafts are also used as a means of credit circulation when the bill of exchange is discounted at a bank or when it is circulated from person to person During the validity period, the bill of exchange is like a commodity traded on the money market.

The article studies many aspects and characteristics of bills of exchange including: circulation characteristics, types of bills of exchange, legal requirements and rights related to bills of exchange, rights and obligations of the drawers and the drawee.

Bill of exchangeis an important commonly used payment method in import and export and is often associated with international payment methods such as L/C or collection entrustment.

CONTENT 1 The process of formation and development

– In the 12th century, bill of exchange in the form of a promissory note.

– In the 14th century, promissory notes played an important role in commerce in France, a country with a strong commercial activity.

– In the 16th century, a promissory note was converted into a bill of exchange +With the economic development and the development of the banking system, bills of exchange have become an important and main instrument in circulation.

–In 1882, the United Kingdom agreed to establish a bill of exchange act (BEA), this is the earliest written bill of exchange law and is still referenced and applied today +Today, bills of exchange are formed mainly on the basis of trade credit (goods and services).

However, drafts are also used in lending, gifting and payment relationships

Along with the development of economy, trade and technology, the bill of exchange is increasingly developed and perfected in both form and content, gradually getting rid of its original economic base of commercial credit.

It means, after being signed , the bill of exchange becomes a valuable paper independent of the economic transaction that produced it Because it is a valuable and negotiable document, drafts are not only used in commercial credit relations, but are also widely used in bank credit relations, discounting, mortgages, and mortgages means of payment in other transactions as well.

Moreover, today's bill of exchange has become a commodity to be bought and sold in the money market.

In particular, in some countries, the trading of bills of exchange has flourished as a separate market.

Until 1930, the Geneva Convention 1930 on the Law of Uniform Bills - ULB 1930 (Uniform Law for Bills of Exchange - Geneva Convention 1930).

Today, the United Kingdom Bill of Exchange Act 1930 is in force in all European countries (except the UK).

2 Meanings and parties to Bills of Exchange

- A bill of exchange is a written order binding one party to pay a fixed sum of money to another party on demand or at some point in the future.

- A bill of exchange is defined 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 the order of a certain person or to the bearer of the instrument”.

2.2 Parties to bill of exchange:

- A bill of exchange has the following parties namely:

Drawer the person who makes or writes the bill of exchange Normally, he/she is the seller

Drawee the person on whom the bill of exchange is drawn for his/her acceptance Normally, he/she is the buyer He/She has to pay the amount of the bill of exchange to the drawer on the due date Payee the person to whom the amount of the bill of exchange is to be

paid The payee can be the drawer himself or the creditor of the drawer

Endorser the person who transfers right of payment

Endorsee the person in whose favor the bill of exchange is endorsed by the drawer

Bearer the person in possession of the bearer bill of exchange

3.Mandatory contents of bill of exchange - Identification of bills of exchange:

+ Format: expressed in text form

+ Model: to be decided by legal and natural persons +Language: same language

+Bills of exchange are usually made in copies and have the same value - A bill of exchange has eight mandatory elements:

a Heading “Bill of exchange”: to distinguish in terms of form whether the document is a bill of exchange or not

- If a country is not a party to ULB 1930 (Unified Bill of Exchange Act 1930) it may not be mandatory for the bill of exchange to have a title Ex: British law

b Order to pay or unconditionally accept payment of a certain amount * Unconditional means:

- A bill of exchange is an order for money, not a demand for money, so the payment of the draft is unconditional.

+ For the drawer: when issuing an order, it must not be accompanied by any conditions or reasons, but merely issue a payment/acceptance order When drawn with conditions attached to make the bill of exchange becomes void.

+ For the drawee: When receiving a draft, the drawee has only 2 options: to pay/accept or to refuse to pay/accept Any payment/acceptance with conditions is null and void.

* Amount stated on the bill of exchange: (depending on the laws of each country, the way to write the amount will be different)

- Geneva Convention 1930:

+ When the payment amount is stated in both numbers and words but do not match, the payment amount will be the amount in words.

+ When the payment amount is written in letters/ numbers many times without matching between entries, the smaller amount will be the payment amount.

- Law on negotiable instruments of Vietnam: similar to the Geneva Convention 1930

c Name and address of drawee

- Specifying the name and address of the drawee is to ensure that the beneficiary can identify who and where is responsible for payment/acceptance of the draft.

- In foreign trade, the drawee depends on the payment method Specifically:

+ In the method of advance, bookkeeping, money transfer and collection: importer of goods.

+ In documentary credit: issuing bank L/C d Bill of exchange payment term

* Pay at sight: Pay on sight, on demand, on presentation of draft

- The time limit for presentation for payment is within 1 year (according to ULB 1930) or 90 days (according to the Law on negotiable instruments of Vietnam) * Term payment

- There are cases:

+ Pay at a certain date after seeing + Pay at a certain date after the issue date + Pay at a certain date after the bill of lading date + Pay at a certain date after the invoice date + Pay at a specific date in the future

- A bill of exchange that does not specify a payment period is considered a bill of exchange for immediate payment, a bill of exchange with multiple payment periods becomes void.

e Place of payment

- The drawee's address is considered the place of payment of the draft If another place of payment is specified on the bill of exchange, this is the place of payment of the bill of exchange.

- Nowadays, people often choose the bank where the drawee opens a transaction account as the payment place, the new bill of exchange has high reliability.

f Name of the beneficiary

- The beneficiary may be: the drawer himself or another person nominated by the drawer, or anyone to whom the beneficiary transfers the bill by hand endorsement In practice, the drawer can designate another beneficiary:

+ Designate another named beneficiary + Regulations on payment by order + Regulations on payment to the holder g Date and place of drawing of draft:

- If the place of draw is not indicated on the bill of exchange, the address of the signer is considered to be the place where the draft is drawn If the bill of exchange does not include the address of the drawer, the bill of exchange becomes null and void.

- The place where the bill is drawn is very important, because the law of the drawee will govern this draft.

h Name, address and signature of the drawer of the bill of exchange

- Name and address must be complete and clear If it is missing or not clear, the bill of exchange will not be able to operate.

The drawer's signature is to be signed on the front in the last right corner of the bill of exchange The manner of signing shall be determined by the law of the place where the bill of exchange is drawn The laws of all countries prohibit the act of drawing drafts without authority or forging signatures.

- In case a bill of exchange is transferred but the drawee refuses to pay/accept it, the drawer is ultimately responsible for payment to the beneficiary.

- In addition to the above 8 contents, the signer can fill in some additional information that provides information related to the creation of the bill of exchange:

+ Drawn under

+ Value received as per our invoice (s) No (s)…dated…

→The eight mandatory elements constitute a bill of exchange, if one of the following 8 elements is missing, the bill of exchange will become worthless Strict observance of the mandatory factors makes the bill of exchange more circulation, and is the basis for determining the rights and obligations of the parties to the bill of exchange 4 Features of bill of exchange

4.1 The abstraction of bills of exchange

- It is not necessary to state the reason for making the bill of exchange, not to state on what basis the credit relationship of the draft must be based on.

- Legal effect does not depend on the cause of the bills of exchange.

- A bill of exchange can be misused to be drawn as a void draft, that is, drawing of a draft is not based on an actual contract of sale, without the commodity underlying the draft.

4.2 Mandatory payment the bill of exchange

- The drawer must pay according to the contents of the bill of exchange, without giving any particular or general reason to refuse to pay.

- The drawer is liable to pay the beneficiary unconditionally if the draft has been delivered without payment.

4.3 Circulatability of bills of exchange

- A bill of exchange may be used one or more times during its term to:

+ Pay for goods or pay any debt.

+ Transfer of bill of exchange to another person.

+ Pledge, mortgage to borrow capital at commercial banks + Discount at commercial banks and re-discount at central banks

→Only bill of exchange that has been accepted for payment is negotiable A bill of exchange accepted by a bank is likely to have a higher circulation than a bill of exchange accepted by a business because the bank is more reputable than the business 5 Types of bill of exchange:

- Documentary bill: - In this, the bill of exchange is supported by the relevant documents that confirm the genuineness of sale or transaction that took place between the seller and buyer.

- Demand Bill: - This bill is payable when it is demanded The bill does not have a fixed date of payment, therefore, the bill has to be cleared whenever presented - Usance Bill: - It is a time-bound bill which means the payment has to be made within the given time period and time.

- Inland Bill: - An Inland bill is payable only in one country and not in any other foreign country This bill is opposite to the foreign bill.

- Clean Bill: - This bill does not have any proof of a document, so the interest is comparatively higher than the other bills.

- Foreign Bill: - A bill that can be paid outside India is termed as a foreign bill Two examples of a foreign bill are an export bill and import bill.

- Accommodation Bill: - A bill that is sponsored, drawn, accepted without any condition is known as an accommodation bill.

- Trade Bill: - This kind of bill is specially related only to trade.

- Supply Bill: - The bill that is withdrawn by the supplier or contractor from the government department is known as the supply bill.

6 Transactions related to bills of exchange 6.1 Draw bill of exchange

- The drawer here is the exporter after signing the sale and purchase contract - The drawer must strictly ensure the form and content

- Any errors that cause the signing of the document to fail or be accepted are the responsibility of the drawer

6.2 Acceptance

- After drawing, the bill of exchange must be presented to the drawee to:

+ This person pays immediately for a spot draft or sign to accept payment for term drafts (if necessary).

- Acceptance of a bill of exchange is the act of the drawee to unconditionally undertake to pay when the bill of exchange is due Acceptance can be made: - The words “accepted", the date and signature of the drawee The drawee's signature on the bill of exchange alone constitutes acceptance.

- Acceptance by letter, telegram In this case, the date of sending the letter, telegram is considered as the date of acceptance

-In fact, whoever pays has to sign the acceptance, so:

+ For the collection method, the importer is the payer, so they are also the signatory to accept the bill of exchange The importer's acceptance is called trade acceptance + For documentary credit, the bank opening the L/C is the payer, so it is also the person who signs the bill of exchange The bank's signing of acceptance is called banker’s acceptance.

6.3 Transfer of bills of exchange

- There are two transfer methods:

+ Hand delivery applies to anonymous bills of exchange (including: to order blank, to bearer, to leave blank, to endorse to bearer, blank endorsement, endorse on empty command).

+ Endorsement: is compulsory for drafts transferred by name order For anonymous bill of exchange, the endorsement of the transfer is not required, but not prohibited.

- Legally, the act of endorsing a bill of exchange includes:

+ Acknowledge the transfer of the right to benefit from the bill of exchange to another person.

+ The assignment of a bill of exchange is an assignment of all rights arising from a bill of exchange.

+ In the case of endorsement with recourse, the act of endorsement determines the responsibility of the endorser for payment to the bearers of the draft.

+ The beneficiary may assign the bill of exchange to the acceptor, drawer, or assignor.

+ Transfer of bill of exchange for 2 or more persons are void.

+ Transfer of part of the amount stated on the bill of exchange is worthless - There are several types of endorsements:

+ Blank endorsement: is an endorsement that does not identify the beneficiary of the bill of exchange brought about by the endorsement procedure.

+ To order endorsement : is an endorsement of a presumptive designation of the beneficiary of the bill of exchange

+ Restrictive endorsement: is an endorsement that appoints the beneficiary of the bill of exchange and only this person.

+ Without recourse Endorsement : is a type of endorsement where once a bill of exchange is rejected, the endorser of the bill is exempt from recourse.

6.4 Bill of exchange guarantee

- A third party's commitment to the guarantor to pay all or part of the amount stated on the bill of exchange if, on maturity, the guarantor fails to pay or does not pay in full - The form of guarantee by:

+ The guarantor writes on the front or back of the bill of exchange the phrase "guarantee", the amount of the guarantee, the name, address, signature of the guarantor and the name of the person being guaranteed on the bill of exchange - In case the guarantee does not include the name of the guaranteed, the guarantee is considered a guarantee for the drawer.