From the following, which statement is not true for bill of exchange?

Question

Accepted Answer

The correct option is 1:

The statement "It is drawn by the debtor" is the one that is **not true** for a Bill of Exchange (BoE), which is why it is the correct answer to the question. A bill of exchange is a financial instrument that is always **drawn by the creditor** (known as the drawer) who is entitled to receive money, and it is drawn upon the debtor (known as the drawee) who is obligated to pay. This instrument formalizes the creditor's claim on the debtor. The instrument that is drawn by the debtor and contains a promise to pay is a Promissory Note.

The incorrect option is 2:
This statement, "It is drawn by the creditor," is **true** for a Bill of Exchange. The drawer, who is the creditor or seller in the underlying trade transaction, creates the bill to legally bind the buyer or debtor (the drawee) to a specific payment date and amount. It is the formal method used by the seller to secure a trade receivable. In essence, the creditor is the party commanding the payment.

The incorrect option is 3:
The statement, "It contains an order to make payment," is **true** and is a fundamental feature of a Bill of Exchange. The negotiable instruments law defines a bill as containing an unconditional **order** addressed by one person to another. This is the primary distinction between a Bill of Exchange and a Promissory Note, which contains a "promise" to pay. The force of the instrument lies in this unconditional command.

The incorrect option is 4:
This statement, "It requires acceptance by the drawee or someone else on his behalf," is **true** for a Bill of Exchange. For the bill to be legally complete and enforceable against the drawee, the drawee must sign it to indicate their acceptance. Until this formal acceptance occurs, the document is considered a mere "draft," not a binding bill of exchange. By accepting it, the drawee legally confirms their commitment to pay the amount on the due date.