ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment
Pellam Ltd, the payee of a bill of exchange payable to order, wishes to transfer it to its supplier, Durrow Ltd. Which step is required to negotiate the bill so that Durrow Ltd becomes the holder?
The bill is negotiated by Pellam Ltd endorsing it, meaning signing it, and delivering it to Durrow Ltd. Because the bill is payable to order, delivery alone is not enough. No new bill, court order or notice to the drawee is required for negotiation.
- APellam Ltd signs (endorses) the bill and delivers it to Durrow LtdCorrect
- BPellam Ltd delivers the bill to Durrow Ltd without signing and notifies the drawee in writing
- CThe drawee must first sign a new bill in favour of Durrow Ltd
- DPellam Ltd must obtain a court order assigning the debt to Durrow Ltd
Explanation
A bill payable to order is negotiated by the payee's endorsement (signature) followed by delivery. Delivery alone works only for a bearer bill. No new bill, court order or notice to the drawee is needed. Writing a notice without endorsing therefore fails for an order bill.
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