EXCHANGE, BILL OF, may be de scribed as a written order or request ad dressed by one person to another, direct ing him to pay on account of the writer to some third person or his order, or to the order of the person addressing the request, a certain sum of money at a time therein specified. The person who gives the direction is called the drawer of the bill, he to whom it is addressed the drawee, and he in whose favour it is given the payee, or, occasionally, the re mitter. Bills of exchange are ordinarily divided into two classes, foreign and in land ; foreign bills comprehend such as are drawn or are payable abroad ; inland, those which are drawn and payable in England. Thus, a bill drawn in France, or even in Scotland or Ireland, upon a party in England, or conversely, is a fo reign bill ; and this is a distinction that has important legal consequences.
The origin of bills of exchange is un known. It is probable or almost certain that the Greeks and Romans were to quainted with some modes of remitting money and paying debts, similar to those effected by a bill of exchange. Instruments of this kind were carrent among the com mercial states of Italy in the early part of the fourteenth century, and it is probable they were not unknown at the close of the same century in England.
It is certain that bills of exchange were originally employed solely as media of remittance, and the circumstances which brought them into use may be explained as follows :— A., at Hamburg, consigned goods to B., in London, either in execu tion of an order, or as his factor for sale. B , thereupon, being debtor to A. for the invoice amount, or the proceeds of the sale, as the case might be, was desirous of remitting to A. accordingly. The re mittance could only be made in money or in goods ; but A. might not want a return cargo of English commodities, and the sending out of specie would be inconve nient and hazardous. Now suppose that some third person, C., were about to go from Hamburg to London, mutual accom modation would suggest the following ar rangement:—A. would deliver to C. an open letter addressed to B., requesting him to pay to C. the amount intended to be remitted : and C. on receiving the letter would pay to A. the value of it in
money current at Hamburg, and having carried it over to London would there receive from B. the sum specified. Thus much of the expense, and all the risk and trouble of remittance would be saved to B6 or A. ; and C., besides having a more convenient sign of wealth, would proba bly receive some advantage for the ac commodation. It is obvious, however, that to bring this exchange into opera tion several things would be wanting: first, the knowledge by the two par ties of the mutual want; secondly, confi dence on the part of C. that the money would be paid by B. on presentment of the letter of request, or that in default of payment by him he would be repaid by A.; and, thirdly, the determining how much C. ought to give A. in ready money of Hamburg for the sum specified in the letter, to be paid at a future day in money of England. Now the adjustment of the comparative value of different currencies, fell directly within the province of the money-dealers or bankers, and as all per sons about to remit or to proceed to fo reign countries resorted to them for the requisite coin, they would furnish the merchants with information as to the other particulars also, and would thus be come the negotiators of this sort of ex changes.
But there were other cases in which the like operation might take place, for although A. might not want goods from England in return for those shipped by him from Hamburg, other Hamburg mer chants might, and so it might happen that at the time of the intended remittance B. had money owing to him at Hamburg in respect of goods so shipped. Let it be supposed then that C., instead of going to London, were about to remit money to B., in that case the whole or a portion, as well of B.'s debt to A. as of C.'s debt to B., might be settled by a simple arrange ment of the same kind as that before de scribed. B. would write a letter ad dressed to C., requesting him to pay a specified sum to A., or, in mercantile phrase, would draw upon C. in favour of A. ; this letter or draft he would remit, as payment, to A., who, upon presentment to C. would receive from him the amount, and would give credit to B. accordingly.