Bill of Exchange

Goods can be sold or bought for cash or oncredit. When goods are sold or bought forcash, payment is received immediately. On theother hand, when goods are sold/bought on creditthe payment is deferred to a future date. In such asituation, normally the firm relies on the party tomake payment on the due date. But in some cases,to avoid any possibility of delay or default, aninstrument of credit is used through which thebuyer assures the seller that the payment shall bemade according to the agreed conditions. In India, instruments of credit have been in use since timeimmemorial and are popularly known as hundies are written in Indian languages andhave a large variety (refer box1).Box 1 Hundies and its TypesThere are a variety of hundies used in our us discuss some of the most common Hundi: This is drawn by one merchant onanother, asking the latter to pay the amount to aShah. Shah is a respectable and responsible person,a man of worth and known in the bazaar.

India these instruments are governed by the Indian Negotiable Instruments Act 1881. 8.1 Meaning of Bill of Exchange According to the Negotiable Instruments Act 1881, 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 ...

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  Bill, Instruments, Exchange, Negotiable, 1881, Bill of exchange, Negotiable instruments act 1881

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