To Wm. Robinson, Esq., London.
The first record of the use of bills of exchange in England is stated to be in a statute of 3 Rich. 11 c. 3, in 1379. The original use of bills in this country appears to have been for the settlement of debts between merchants in England and those in another country. For example, where Brown in England owed money to Dumont in, say, France, he would draw a bill upon Hugo in that country, who happened to owe him money, requesting Hugo to pay the money to Dumont. In this way Brown paid his debt to Dumont without the necessity of sending gold from England to France.
It is said that bills were in common use in Venice as early as the thirteenth century, and that they were first used by the Floren tines in the twelfth century. Inland bills were made legal in England in 1697.
The persons whose names appear upon a bill of exchange are the drawer, the drawee (who by accepting the bill becomes the acceptor), the payee (who may also be the drawer), and the indorser. These persons are called the parties to the bill. In addition there may also be the name of the drawee banker at whose office the acceptor makes the bill payable, but he is not one of " the parties " to the bill.
The parties who are closely related, as the drawer and the acceptor, an indorser and the indorser immediately preceding him, are the " immediate parties." The parties who are not closely related, as the drawer and an indorsee, are the " remote parties." A bill may be an inland bill (that is, one both drawn and payable within the British Islands, or drawn within the British Islands upon some person resident therein), or a foreign bill (that is, one drawn otherwise than as an inland bill).
The holder of a bill of exchange may hold it till it is due and present it for payment himself ; or he may negotiate the bill, that is, transfer it to another person ; or he may leave it with his banker with a request that the bill be collected at maturity and the proceeds credited to his account ; or he may take it to his banker, or to a bill broker, and after indorsing it have it discounted. By discounting a bill he receives at once the amount of the bill (which may not be payable by the acceptor for some months to come), less the amount charged for discounting it. The banker debits the amount of the bill to his bills discounted account and credits it, less the discount, to his customer's current account, the discount passing to the credit of discount account, the balance of which I account is periodically transferred to profit and loss account.
A bill drawn payable on a contingency, such as at a certain period after the arrival of a ship, is not valid.
It is very desirable that bills and cheques should be written in ink and not be type-written, as instruments which are type-written are too easily altered.
In Pitman's " Bills, Cheques and Notes," eight excellent pieces of advice are given with respect to bills of exchange. The hints are principally for traders, though some of them are specially applicable to bankers, but all of them should form part of a banker's creed with regard to those instruments. They are given as " practical hints which may serve as warnings " .
1. Never draw or accept an accommo dation bill, unless you are prepared to meet it whenever called upon.
2. When a bill has been drawn by you, endeavour to secure its acceptance before negotiating it.
3. Unless you are to be personally liable upon the bill, take care that any signature you place upon it, whether as drawer, acceptor, or indorser, shows clearly that you are signing in a representative capacity.
4. Never indorse a bill without receiving value for it.
5. Never discount a bill for a stranger. Be sure that you know the person from whom you receive a bill and take care that he indorses it.
6. Examine the bill carefully.
7. If you are the holder, present the bill for acceptance, if it has not been accepted, and for payment at the proper time. If either acceptance or payment is refused, give notice at once to every indorser and to the drawer, so as to hold each and all liable for payment.
S. Upon payment of a bill take care that you get the document into your own possession.
With respect to the proposed rules regard ing the unification of the laws existing in different countries relating to bills of ex change, see UNIFICATION OF LAWS OF BILLS OF EXCHANGE.
By the Stamp Act, 1891, the duty is : BILL OF EXCHANGE S. Payable ou demand or at sight or on presentation . . . 0 0 1 And see Sections 32, 34, and 38, Stamp Act, 1891, given below.
This .vas extended by the Finance Act, 1899, Section 10, s.s. 2. to read as if the words " or within three days after date or sight " were contained therein after the word " presentation " ; and this section has now been extended by Section 10 of the Revenue Act, 1909, which enacts as follows :—" The provisions in Sections 34 and 38 of the Stamp Act, 1891, which relate to bills of exchange payable on demand, or at sight. or on pre sentation, shall apply also to bills of exchange expressed to be payable at a period not exceeding three days after date or sight, which are chargeable with the duty of one penny under s.s. 2 of Section 10 of the Finance Act, 1899."