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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

Marlo Ltd holds a bill of exchange that is payable to Marlo Ltd or order. Marlo Ltd signs its name on the back of the bill and delivers it to Perrin Ltd in settlement of a debt. What is the effect of this transaction?

Marlo Ltd has negotiated the bill by endorsing it and delivering it. Perrin Ltd becomes the holder and may enforce the bill. Transfer does not discharge the bill, and acceptance is something only the drawee does, not the endorser.

  1. AThe bill is discharged because it has been delivered to a creditor
  2. BMarlo Ltd has negotiated the bill by endorsement and delivery, and Perrin Ltd becomes the holderCorrect
  3. CMarlo Ltd has accepted the bill and becomes primarily liable to Perrin Ltd as drawee

Explanation

A bill payable to order is transferred by the payee's endorsement (signature on the back) together with delivery, which is negotiation. Perrin Ltd becomes the holder, and Marlo Ltd as endorser may be liable if the bill is dishonoured. Acceptance is the drawee's act, and the bill is not discharged by transfer.

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