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Thread: Q. Define and distinguish between bill of Exchange and a Cheque. (1999)

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    Word Icon 35px Jpg.ashx Q. Define and distinguish between bill of Exchange and a Cheque. (1999)

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    1. Introduction:
    The negotiable instrument act recognized only three instrument viz., a bill of exchange a cheque and a promissory not. a bill of exchange is an instrument in writing containing an unconditional order signed by the maker directing to pay a certain sum of money to a certain person or bearer. a cheque is a written order of a depositor upon a bank to the designate party or bearer a specified sum of money on demand.
    2. Definition of a cheque:
    According to Sec 6.
    "A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand."
    3. Explanation:
    The person who draws a cheque is called drawer and person to whom the cheque is made payable is called payee and the bank upon which the cheque is drawn is known as drawee.
    4. Kinds of cheque:
    (i) Bearer cheque.
    (ii) open cheque.
    (iii) order cheque.
    (iv) Crossed cheque.
    (v) Traveller's cheque.
    5. Essentials of a cheque:
    Following are the essentials of a cheque.
    I. Written:
    The cheque must be in writing.
    II. Unconditional:
    It contain an unconditional order to pay.
    III. Signature of the drawer:
    It should contains the signature of the drawer.
    IV. Certain sum of money:
    It contains a certain sum of money.
    V. Upon a bank:
    Cheque is an order of a depositor upon a bank.
    VI. Payable on demand:
    It must be payable on demand.
    VII. Certain person:
    It must be payable to a certains person.
    6. Bill of exchange:
    I. Definition:

    According to Sec. 5.
    "A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money only to or order of a certain person or the bearer of the instrument."
    II. Explanation:
    The person who makes the bill is called drawer. the person who is directed to pay is the drawee. the person to whom the payment is to be made is called payee.
    III. Essentials:
    (i) Written:

    The bill of exchange must be in writing it may be written in any language.
    (ii) Unconditional order:
    The order contained in the bill of exchange must be unconditional.
    (iii) Signed by the drawer:
    Bill of exchange must be signed by the drawer.
    (iv) The drawee must be a certain person:
    The drawee of a bill of exchange must be a certain person. his name should be mentioned in it.
    (v) The payee must be a certain person:
    The payee of the bill also be a certain person.
    (vi) The sum payable must be certain:
    The sum payable must be certain and definite.
    (vii) Pakistani currency:
    The sum payable must be in Pakistani currency.
    (viii) Other legal formalities:
    (i) It should be dated.
    (ii) Name of place where it is drawn.
    (iii) It should be attested.
    (iv) It should be properly stamped.
    7. Distinction between cheque and a bill of exchange:
    I. Drawee:

    A cheque is always drawn on a specified bank.
    A bill may be drawn on any person including a banker.
    II. Payable on demand:
    A cheque is drawn payable on demand.
    A bill of exchange is drawn payable on demand or expiry of certain period.
    III. Condition of acceptance:
    A cheque does not require an acceptance by the drawee.
    A bill of exchange requires acceptance by the drawee.
    IV. As to revocation:
    A cheque can be revoked by the drawer.
    Bill of exchange cannot be revoked.
    V. Payable to bearer on demand:
    A cheque drawn payable to bearer on demand is valid.
    A bill of exchange drawn payable to bearer on demand is not valid.
    VI. As to stamps:
    A cheque does not require any stamps.
    A bill of exchange is stamped according to the stamp act.
    VII. As to crossing:
    A cheqye may be crossed.
    A bill of exchange can not be crossed.
    VIII. As to notice of dishonouer:
    When cheque is dishonoured no notice is required.
    When a bill of exchange is dishonour notice is required to all the parties.
    IX. As to noting or protest:
    In cheque there is no need of noting and protest.
    In bill of exchange, there is need of noting and protest.
    X. Grace period:
    There is no grace period in a cheque.
    There grace days are allowed in calculating the maturity date of the bill of exchange.
    8. Conclusion:
    To conclude I can say that, a cheque is a written order of a depositor upon a bank to pay that designated party or bearer a specified sum of money on demand where as a bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or order of a certain person or bearer of instrument. a cheques mainly drawn to minimize the use of metallic money. in both instruments three parties are involved.

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