What is a Bill of Exchange (BoE)?
Imagine a situation where a buyer wants to purchase goods or property from a seller but plans to pay either in full or after six months. In such a scenario, the agreement for this purchase solely involves the buyer and the seller. The involvement of entities like bank workers, estate agents, or solicitors is not part of the direct purchase agreement. Even though bank workers are employees, they act as fiduciaries or trustees, serving the public in their capacity at the bank, which is considered a public office. This is a little-known fact that is often misunderstood.
In this arrangement, the buyer commits to make the payment, whether in part or in full, through a bill of exchange. This bill can be endorsed by a bank (the drawee), assuring the seller (payee) that the agreed-upon payment will be transferred to their account. The bank’s role is strictly limited to processing this payment; they cannot interfere in the transaction between the buyer and seller, nor can they refuse the bills of exchange. According to the legal understanding, a bill of exchange, clearly marked as cash, is equivalent to cash itself, as stated in the High Court Judge Lord Denning’s judgment, codified under the Bills of Exchange Act 1882, where he declared that a bill of exchange or a promissory note should be treated as cash in the courts of England.
When the buyer commits to paying either partially or fully for the purchase using a bill of exchange, this bill may carry the guarantee of a bank, the drawee, ensuring that they will transfer the agreed-upon payment to the seller’s payee account. However, the bank or drawee’s role is strictly limited to this action alone. They are not permitted to interfere with or halt the transaction between the seller and the buyer. Refusing bills of exchange is also beyond their authority. According to the Bills of Exchange, these instruments are considered equivalent to cash, a principle reiterated in a judgment by Lord Denning in an English court, which stated that a bill of exchange or a promissory note is to be treated as cash.
In this scenario, once the seller (payee) releases the goods or property to the buyer (drawer/maker of the bill), the buyer then creates a bill to be drawn on the bank (drawee) for the honorable discharge of part or full payment to the seller. If the bank interferes by stopping this transaction, it constitutes a tort, possibly treason, and a deliberate act of fraud. Such actions could be considered “Uttering laws.”
If the bank obstructs this exchange, it incurs personal and commercial liability for the payment owed to the seller. The bank’s role is strictly limited to transferring the funds to the seller’s account and lacks the authority to halt this transaction between parties. It’s important to consider the impact of actions on others.
Banks, fundamentally, hold assets and funds for safekeeping but cannot extend credit as they have none to offer. The true holder of credit is the drawer (maker of the promissory note), which is utilized to access the trust held by the drawer under the Cestui Que Vie “Trust,” as explained on the Bank of England’s website. The key elements here are the note and trust, with the drawer having various trusts linked to their name. Conversely, the drawee’s sole duties within the bank are to transfer payments to the seller’s account, and failure to do so breaches their role as a servant/fiduciary/trustee.
The Bills of Exchange Act of 1882
The Bills of Exchange Act of 1882 defines a bill of exchange as an unequivocal written order from one person (Drawer/Maker) to another (Payee/Seller). This order, signed by the person issuing it (Drawer/Maker), mandates the individual it’s directed to (Payee/Seller) to pay a specific sum of money immediately on demand or at a predetermined future date to a designated person or to the order of a specified individual, or to the bearer.
According to the Stamp Duty Act of 1891, section 34, subsection 1, a penny stamp is required on the instrument. The bearer of the bill can be the creator of the bill themselves, enabling them to either pay themselves or transfer it to another person, even as a gift. Consequently, the individual who becomes the bearer of the bill is regarded as the seller/payee. The maker/beneficiary of the bill possesses full ownership and authority over it, including all contained assets and funds. They alone can release these assets or funds, commonly recognised as cash or money, as they retain complete and unrestricted credit, being the sole creator and true holder of credit.
25 Inchoate instruments
- Where a simple signature on a blank stamped paper stamped with an impress duty stamp is delivered by the signer in order that it may be converted into a bill, it operates as a prima facie authority to fill it up as a complete bill for any amount the stamp will cover, using the signature for that of the drawer or the acceptor or an indorser.
- And in like manner when a bill is wanting in any material particular, the person in possession of it has a prima facie authority to fill up the omission in any way he or she thinks fit.
- In order that any such instrument when completed may be enforceable against any person who became a party thereto prior to its completion, it must be filled up within a reasonable time, and strictly in accordance with the authority given. Reasonable time for this purpose is a question of fact:
Provided that, if any such instrument after completion is negotiated to a holder in due course, it shall be valid and effectual for all purposes in his or her hands, and he or she may enforce it as if it had been filled up within a reasonable time and strictly in accordance with the authority given.
- For the purposes of subsection (1) of this section, duty stamp includes a duty stamp, required, by the law of the State in which the instrument is issued, to be impressed on a bill.