Bill of Exchange Law


4. Types of Bills of Exchange According to the Czech Law

Bills of exchange can be sorted according to various criteria. Bill of exchange law distinguishes bill of exchange and promissory note. From the simplified point of view, promissory note is a certain variant of a credit paper. Its substance is a promise of a drawer to pay to a creditor (payee) certain financial sum. As a rule, a promissory note therefore contains characteristic expression "I will pay". In its basic form it has only two participants - drawer and creditor (payee). The drawer of a promissory note is a direct debtor obliged by his sign to pay at the maturity.

This is not the case of a bill of exchange (draft). For a reader meeting the bill of exchange law for the first time it could seem that bill of exchange is a complication of a simple and clear scheme of a promissory note (which so clearly reflects relation debtor - creditor to a bill instrument). For a bill of exchange is usually used a term "trata".

The bill of exchange is distinguished from the note above all by the fact that, in its basic form, it requires higher number of participants. Speaking about a basic bill of exchange, there are drawer and payee again, but this once relations between them are "complicated" by another participant - drawee. Substance of a bill of exchange is in payment order of a drawer to a drawee to pay certain financial sum to a payee. As a rule, a bill of exchange therefore contains characteristic expression "Pay to".

On certain conditions, number of participants can be reduced, since drawer, drawee and creditor do not have to be 3 different persons. The BECA takes as valid two bills of exchange with reduced number of participants: a bill of exchange drawn on the drawer himself (Article I, Section 3 par. 1) and a bill of exchange payable to his order. The bill of exchange with only one participant is not valid.

Bill of exchange drawn on the drawer himself is a bill of exchange, where drawer declares himself as a creditor (by words "to my own order"). Drawer and payee is the same person in this case.

Bill of exchange payable to drawer's order is a bill of exchange where the drawer orders to himself to pay to a payee. Drawer and drawee is the same person here. To get a direct debtor, the bill of exchange has to bear an acceptation by the drawee.

In the following text we will not make a difference between a bill of exchange and a promissory note. Speaking about a bill of exchange, we mean promissory note as well, unless from the context arises something else. The Czech language has one expression for a bill of exchange as well as for promissory note: "smìnka". For a bill of exchange the expression "smìnka cizí" is used, for a promissory note the expression "smìnka vlastní" is used.

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