Define a bill of exchange. Explain its essentials, the parties to it and the consequences of dishonour.
How to lay out the answer. Follow the frame, then write it in your own words.
1 · Give the definition. An unconditional order in writing, addressed by one person to another, signed by the drawer, to pay on demand or at a fixed or determinable future time a sum certain in money to a specified person or bearer.
2 · Break it into essentials. Writing; order; unconditional; addressed; signed; time of payment; sum certain; payee or bearer.
3 · Parties. Drawer, drawee, acceptor, payee, endorser, endorsee, holder, holder in due course.
4 · Draw the life of a bill. [Diagram: drawn → accepted → endorsed → presented → paid or dishonoured]
5 · Dishonour and its consequences.
Non-acceptance or non-payment.
Notice of dishonour to drawer and endorsers, or they are discharged.
Protest for foreign bills; holder sues all liable parties.
6 · In Sri Lankan business. An importer accepts a 90-day bill; the supplier discounts it with its bank.
7 · Close in one line. The bill gives credit to the buyer and quick cash to the seller, which is why trade still uses it.
Scoring tip: Write the definition word for word, then underline each essential. It earns marks on its own.
