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

Tolu Ltd sells machinery to Brandt GmbH and draws a bill of exchange on Brandt payable 90 days after sight. Brandt writes its signature across the face of the bill. What is the legal effect of this act?

By signing the face of the bill, Brandt as drawee accepts it and becomes the acceptor, primarily liable to pay the amount at maturity. It is not an endorsement, which is a transfer by a holder, and the bill is not discharged until it is paid.

  1. ABrandt accepts the bill and becomes primarily liable to pay it at maturityCorrect
  2. BBrandt endorses the bill and transfers it to Tolu Ltd
  3. CBrandt discharges the bill and Tolu Ltd has no further claim

Explanation

When the drawee signs the bill to show agreement to the order, this is acceptance. The drawee then becomes the acceptor and is primarily liable to pay at maturity. Endorsement is a signature by a holder, usually on the back, to transfer the bill. Nothing is discharged until payment.

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