International trade settlement instruments: bills and their characteristics
In international trade, bills have become an important settlement tool due to their unique characteristics and legal status. This article aims to provide a comprehensive explanation of the concept of notes and their key features in international trade settlement.
The concept of bills
According to the “Negotiable Instruments Law of the People’s Republic of China”, instruments are divided into three categories: bills of exchange, checks and cashier’s orders. Among them, bills of exchange can be further divided into bank bills and commercial bills; commercial bills are further divided into bank acceptance bills and commercial acceptance bills. Checks are divided into transfer checks, cash checks and ordinary checks; cashier’s checks only refer to bank cashier’s checks. When discussing bills, we usually adopt a narrow definition, that is, a bill is a marketable security in which the drawer promises or entrusts others to unconditionally pay a certain amount of money to the payee or holder at sight or on a specified date.
Characteristics of bills
Liquidity
The liquidity of bills is one of the most basic and important characteristics. It means that the instrument can circulate freely in the market, just like cash, and can be transferred to others by endorsement or delivery without notification to the original debtor. This characteristic makes bills widely accepted as the main settlement method replacing cash in international trade. Depending on the mode of circulation, the bill can be paid to the holder by paying to a designated person of a specific person, paying to a guest, the last endorsement on the bill being a blank endorsement, or paying directly to a specific person.
Causeless
Causeless means that the note holder has the unconditional right to payment and is not affected by the reason for the issuance or transfer of the note. As long as the form of the instrument is legal, even if there are some rights defects, the holder can still exercise the rights based on the records on the instrument. This feature ensures that the transferee of the note does not need to worry about whether the transferor has rights defects, thereby enhancing the acceptance of the note.
Establishing authority
The establishment of rights emphasizes the function of the bill to establish new rights, rather than proving existing rights. This means that once the bill is generated, it gives the bearer the corresponding right to claim money, and the existence of this right depends on the actual possession of the bill.
Contextuality
The rights and obligations of the parties to the bill depend entirely on the written content on the surface of the bill, and any matters not recorded on the bill will not affect the validity of the bill. This provision protects the interests of bona fide ticket holders and ensures transaction security.
Require formality
The act of bill must comply with strict legal regulations. All aspects from bill issuance to endorsement, presentation, transfer and recourse must comply with legal forms, otherwise it will be deemed invalid.
Traceability
When the note payer refuses to accept or pay, the note holder can pursue relevant rights and interests from all note debtors through legal channels.
Informative
The holder must present the instrument to the debtor before exercising his right to demand payment or recourse.
Returnability
After receiving the amount of the bill, the holder should return the bill to the payer to terminate the bill relationship.
The above characteristics together constitute the indispensable role of bills in international settlement. In particular, negotiability, causelessness and formality not only support the basic operating mechanism of bills, but also provide a solid legal foundation for their wide application around the world.