ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment
Marlow Ltd, a seller in Country A, draws a document stating: 'Pay to the order of Marlow Ltd, 90 days after sight, the sum of USD 50,000', addressed to Brindle Inc, the buyer in Country B. Brindle Inc signs its acceptance across the face of the document. Which description of this document is correct?
The document is a bill of exchange. Marlow Ltd, which issues the written order to pay, is the drawer, and Brindle Inc, to whom the order is addressed, is the drawee. By signing acceptance, Brindle Inc becomes the acceptor and is primarily liable to pay the bill at maturity.
- AA bill of exchange, with Marlow Ltd as drawer and Brindle Inc as drawee who becomes the acceptorCorrect
- BA promissory note, with Brindle Inc as the maker and Marlow Ltd as payee only
- CA bill of lading, with Marlow Ltd as carrier and Brindle Inc as consignee
- DA cheque, with Brindle Inc as the bank on which it is drawn
Explanation
A bill of exchange is an unconditional written order by the drawer directing the drawee to pay a fixed sum to a payee at a set time. Marlow Ltd gives the order, so it is drawer (and payee), and Brindle Inc is drawee. Once Brindle Inc signs acceptance it becomes the acceptor and is primarily liable. A promissory note is a promise by the maker, not an order to a third party.
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