The advantages of using bills of exchange in international trade

The advantages of payment by means of a bill of exchange are as follows.

1. They provide a convenient method of collecting payments from foreign buyers.

2. The exporter can seek immediate finance, using term bills of exchange, instead of having to wait until the period of credit expires (ie until the maturity of the bill).

Finance is obtainable in a number of ways. At the same time, the foreign buyer is allowed the full period of credit before payment is made.

3. On payment, the foreign buyer keeps the bill as evidence of payment, so that a bill of exchange also serves as a receipt.

4. If a bill of exchange is dishonoured, it may be used by the drawer to pursue payment by means of legal action in the drawee’s country.

5. The buyer’s bank might add its name to a term bill, to indicate that it guarantees payment at maturity. On the continent of Europe, this procedure is known as ‘avalising’ bills of exchange or providing a guarantee ‘par aval’(French) or ‘por aval’ (Spanish).

Promissory Note

A promissory note is an unconditional promise in writing wherein the maker agrees to pay a specific sum of money at a fixed date to a particular person.

A promissory note is defined in the Bills of Exchange ACT as:

1. an unconditional promise in writing:

2. made by one person (the buyer);

3. to another (the exporter);

4. signed by the maker (the buyer);

5. engaging to pay;

6. on demand, or at a fixed or determinable future time;

7. a sum certain in money;

8. to, or to the order of, a specified person or to bearer.

There is a clear similarity between this definition and the definition of a bill of exchange, but the important difference is that the promissory note is written and signed by the person who promises to make the payment (the buyer), and sent to the person who is owed the money by the exporter). A bill of exchange in contrast is drawn by the exporter and sent to the buyer (who is expected to accept and subsequently pay it).

A promissory note is said to be 'inchoate' until it has been delivered to the payee or bearer. It is an IOU, and when payment is due, it is presented for payment by the holder, who might be the exporter or someone else to whom the note has been 'negotiated'.

Assignment

1. Suggest the Ukrainian for the following words and word combinations from the text.

financial documents, payment, bill of exchange, promissory note, define, unconditional order in writing, tenor, term bill, settlement, sight bill, sole, usance, maturity, IOU, trade bill, bank bill, accomodation bill, dishonored bill, accomodation, inchoate, on demand, a sum certain in money, sign the bill, exporter, foreign buyer, ’45 days sight’, advantages, immediate finance, receipt, loss.

2. Find in the text English equivalents for the following words:

розрахунок, міжнародна торгівля, фінансові документи, боргова розписка, визначати, строковий вексель, строкова тратта на пред’явника, торгова тратта, безгрошовий вексель, простий вексель, переводний вексель, опротестований вексель, письмовий наказ, на вимогу, певна сума грошей, дисконтна ставка, визначена дата, метод розрахунку, втрати.