Hk Business Law Assignment Part II

Part II

1. Explain the meaning and liability of a drawer of a bill of exchange and identify who is the drawer of this sample bill of exchange.

The drawer is the party who ‘draws up’ the bill of exchange. When bills were first used, the process of drawing up was lengthy because they were written by hand. Today, the drawer usually completes a pre-printed form which includes his name and other key phrases.

The drawer addresses his order to the drawee. The drawer will specify the amount of money which is to be paid and order the drawee to make that payment. The drawer must also specify who is to receive the payment. The drawer must sign the order. His signature is very important: without it, the order is not a bill. However, his signature may be some other person acting under his authority.

The drawer is primarily liable to pay the bill of exchange that he has drawn up unless the drawee accepts that responsibility. If the drawee is primarily liable to pay, the drawer’s liability is as a surety, i.e. he is liable to pay the order only if the drawee fails to pay.

The drawer’s order to pay is directed the drawee. In the example above, (Dora Ng) Dora Co. Ltd. is the drawer, and he is addressing his order to Star Co. Ltd., who is the drawee of the bill. And a bill must be signed by the drawer or by a person authorised to sign on his behalf (s.97). On this bill also is signed by Dora Ng.

1. Explain the meaning and liability of a drawee of a bill of exchange and identify who is the drawee of this sample bill of exchange.

The drawee is the party who is order to pay the amount of money stated in the bill of exchange. For example, the drawee may be the buyer of the goods. In practice, the drawee of a bill of exchange is often a banker, and the drawee of a cheque must be a banker.

The order to pay does not make the drawee liable. He cannot be sued for the amount stated in the bill of exchange simply because he has been named as drawee. The drawee is only liable to pay if he accepts the bill. The bill must be presented to the drawee, and if he agrees with the order he will sign the front of the bill and may write or stamp ‘accepted’. Once the drawee has accepted, he is described the acceptor and is then primarily liable to pay the bill.