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

Under the usual international rules on bills of exchange, which statement best describes a bill of exchange?

A bill of exchange is a written, unconditional order from the drawer to the drawee to pay a fixed sum to a named payee or bearer, on demand or at a future date. A promise to pay describes a promissory note instead.

  1. AA written promise by one person to pay a sum to another on demand or at a fixed future date
  2. BA written unconditional order by the drawer, addressed to the drawee, requiring the drawee to pay a fixed sum to a payee or bearer on demand or at a future dateCorrect
  3. CA written undertaking by a bank to pay the seller once the goods have been shipped

Explanation

A bill of exchange is an unconditional written order from the drawer to the drawee to pay a fixed sum to the payee or bearer, on demand or at a fixed or determinable future time. Option A describes a promissory note, which involves only two parties and a promise rather than an order. Option C describes a bank undertaking such as a letter of credit.

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