- This topic has 3 replies, 2 voices, and was last updated 5 years ago by
.
- Posts
Hi Mike,
This shouldn’t be confusing me but for some reason it’s not making sense. In the below question I would have said that Peter is the drawer as he is selling the goods. However the answer is Gordon. Could you explain? Thanks.
——————————————-
Peter is selling 5 tonnes of copper to Gordon, with the transaction financed by an international bill of exchange. BBB Bank is acting for Peter and CCC Bank is Gordon’s bank.
Which party is the drawer of the bill of exchange?
Are you at all familiar with the cheque system of settling debts?
Maybe it’s just a British idiosyncrasy?
If I were to buy goods from, say, Peter then I would settle the debt by drawing up a payment instruction telling my bank to pay to Peter the sum of the debt
So I draw the cheque and I’m the drawer
I’m telling the bank to pay Peter, so my bank is the drawee
And I’m telling my bank to pay Peter, so Peter is the payee
Fit those three into this 1892 definition of a bill of exchange
“A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand (or at a fixed or determinable future time) a sum certain in money to (or to the order of) a specified person or to bearer ”
In this definition, and using the characters in your question (and, say, Barclays Bank), Gordon is the drawer, instructing Barclays Bank (the drawee) to pay Peter (the payee)
So now we have:
“A bill of exchange is an unconditional order in writing, addressed by one person (Gordon) to another (Barclays), signed by the person giving it (Gordon), requiring the person to whom it is addressed (Barclays) to pay on demand (or at a fixed or determinable future time) a sum certain in money to (or to the order of) a specified person (Peter) or to bearer”
NOW does it make sense?
- You must be logged in to reply to this topic.