The definition of a bill of exchange given in my country’s “Bills of Exchange Law” is: a bill of exchange is issued by the drawer, entrusting the payee to unconditionally pay a certain amount of money to the payee or holder upon sight of the bill or on a specified date.
The definition of a bill of exchange given in the UK “Bills of Exchange Act” is: a bill of exchange is a written unconditional order issued by one person to another, signed by the person issuing the order, requiring the person receiving the order to pay a certain amount of money to a specific person, his designated person or a visitor immediately or at a fixed time, or at a certain future time.
There are many types of bills of exchange, which can be divided into different types from different perspectives:
1. Bank draft and commercial draft
According to the different drawers, bills of exchange can be divided into bank drafts and commercial drafts.
(1) Bank draft is a written payment order issued by one bank to another bank, and its drawer and payee are both banks. The credit basis of a bank draft is bank credit.
(2) Commercial draft is a bill of exchange issued by a company, enterprise or individual. The payee can be a company, enterprise or individual, or a bank. The credit basis of commercial draft is commercial credit, and the risk borne by the payee or holder is relatively high. However, by accepting commercial drafts, especially by banks, the risk of the payee or holder can be reduced.
2. Sight draft and time draft
According to the payment time, bills can be divided into sight draft and time draft.
(1) Sight draft refers to a bill of exchange that is payable immediately when the bill is presented or seen.
(2) Time draft refers to a bill of exchange that is payable within a certain period of time in the future or on a specific date. According to the payment date recorded on the bill of exchange, time drafts include three types: bills payable at a fixed time after the issue date, bills payable at a fixed time after the sight date, and bills payable on a fixed date. Time drafts must be accepted by the payee to determine their payment obligations.
3. Clean drafts and documentary drafts
Depending on whether they are accompanied by documents, bills can be divided into clean drafts and documentary drafts.
(1) Clean drafts refer to drafts that are not accompanied by any shipping documents. Most bank drafts are clean drafts.
(2) Documentary drafts refer to drafts that are accompanied by relevant documents. Documentary drafts are generally commercial drafts. The circulation, transfer and financing of documentary drafts depend not only on the credit of the parties, but also on the quality of the documents.
4. Bank acceptance drafts and commercial acceptance drafts
Depending on the acceptor, bills can be divided into bank acceptance drafts and commercial acceptance drafts.
(1) Bank acceptance drafts refer to time drafts where both the payee and the acceptor are banks. Bank acceptance drafts are based on bank credit.
(2) Commercial acceptance bill refers to a forward bill of exchange that is undertaken by a company, enterprise or individual. Commercial acceptance bills are based on commercial credit.
5. Domestic and foreign bills of exchange
According to the different circulation scopes, bills of exchange can be divided into domestic and foreign bills of exchange.
(1) Domestic draft refers to a bill of exchange whose circulation scope is limited to a certain country.
(2) Foreign draft refers to a bill of exchange whose circulation scope is in more than two countries.