1. Definition
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 a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
- Drawer: The maker of the bill (Credits Sales).
- Drawee: The person who accepts the bill (Credit Purchases).
- Payee: The person to whom payment is made.
2. Promissory Note
An unconditional undertaking in writing (not being a bank note or currency note) to pay a certain sum of money.
- Parties: Maker (Debtor) and Payee (Creditor). Two parties only.
3. Important Terms
- Days of Grace: 3 extra days added to the period of the bill.
- Discounting: Encashing the bill from the bank before due date.
- Endorsement: Transferring the bill to a third party (Creditor).
- Retirement: Payment of bill before due date (Rebate is allowed).
- Dishonour: Non-payment of bill on due date. Noting charges may apply.
- Renewal: Cancellation of old bill and drawing a new bill with interest.