Negotiable instruments consist of signed papers that offer to pay a certain amount of money to the owner or recipient at a certain date or when asked. People or organizations can use these tools in the best way possible because they are transferable.
There are three kinds of Negotiable Instruments: a Promissory Note, a Bill of Exchange, and a Check.
What Does “Bill of Exchange” Mean?
Bill of Exchange is a tradable instrument, which means it is a legally binding document that says someone has to pay someone a certain amount of money within a certain amount of time or whenever the owner of the instrument says so.
You owe money to someone, and they owe you money. To get paid, the seller gives you a Bill of Exchange. One important thing about a Bill of Exchange is that it has to be accepted by a customer in order to be legal.
In business, it is used to settle the debt between the various parties involved in the deal. The bill of exchange is made up of three parties, who are:
- Drawer: The drawer is the person who gives out the instrument so that they can get paid.
- Drawee: The drawee is the person who needs to give the drawer the money.
- Payee: The person who gets the money is the payee. The drawer and the receiver are usually the same person, unless the drawer sends the money to a third-party payee.
What Does “Promissory Note” Mean?
If someone or something writes down on a promissory note that they will pay a certain amount of money to the person who holds it, either when the note holder asks them to or at a certain date in the future, the promise is legally binding.
The most important thing about a promissory note is that the creditor doesn’t have to accept it once it’s been signed by the debtor.
There are two people involved in the promissory note. These are them:
- Drawer: The person who owes money and offers to pay it back to the loan or borrower.
- Drawee: You owe money to someone, and they agreed to pay you. This person is called the recipient of the payment.
