Introduction
In an international sale of goods, the seller typically draws a bill of exchange (‘bill’) payable 9.01 to itself. The seller ‘discounts’ the bill by indorsing it to its bank (‘the remitting bank’) for value received in the form of immediate provisional credit to the seller’s account.
The remitting bank then forwards the bill for presentment to the drawee. In a typical case, the drawee is either the buyer or the buyer’s bank. In such a situation, the presenting bank is usually the buyer’s bank. Where the drawee is a bank, the remitting bank could act as the presenting bank. Otherwise, the itinerary from the remitting bank to the presenting bank could pass through intermediary bank(s), each indorsing the bill to the next one for value. Any bank involved in the collection, other than the remitting bank (but including the presenting bank), is a collecting bank. Where the bill is payable at a future time, so that it is a ‘term draft’, the drawee who accepted the bill may return it to the presenting bank, which can then continue to negotiate it for value. Where the drawee/acceptor is the buyer, the instrument is a trade acceptance. Where the drawee/acceptor is a bank, it is a bank acceptance. Either way, on the due date, the drawee pays the bill to the holder and money moves back to the remitting bank, at which point the credit to the seller’s account finalises. Conversely, if the bill is dishonoured, the presenting bank may either attempt to enforce it against the acceptor (if the bill has been accepted) or return the bill backward towards the remitting bank, which will in turn reverse the provisional credit previously given to the seller.Bills remain important in international trade because they are both payment and credit in- 9.02 struments, while also providing assistance in the facilitation of liquidity.
At the same time, in international trade - and, in fact, always between distant parties to a sale transaction - the physical transportation of bills from place to place may be slow, not completely safe, and certainly inefficient. However, a bill must be something tangible, on which words could be written so as to create a permanent tangible record, and physically deliverable from hand to hand in order to confer and acquire rights thereon.The chapter does not endeavour to propose a uniform law recommended for all jurisdic- 9.03 tions to adopt. Rather, it discusses revisions for domestic laws designed to move the law of negotiable instruments to the electronic age. Nor does the chapter address changes to conflict of laws rules—other than pointing at the functional equivalents for existing requirements premised on paper-based environment such as signature and delivery.
9.04 The chapter thus discusses various aspects of the electronification of bills. Section II presents the legal requirements for both written and electronic formats as either applied or as may be applied to bills. Section III addresses the electronic presentment of a paper bill. Section IV deals with the legal status of a substitute paper bill created out of an electronic image. Section V analyses the handling of an electronic image of a bill. Section VI focuses on a bill created and evolving electronically. Section VII addresses the option of having bills either in paper or electronic format immobilised by means of a deposit to a clearing house where they are to be transferred by means of making appropriate entries in its records. The concluding observation of section VIII is that it is both desirable and feasible for the law to accommodate not only an electronic bill but also the potential conversion of a physical bill to an electronic one and vice versa in the life of one such an instrument.
II.