According to section 5 of the Negotiable Instruments Act, 1881, defines Bill Of Exchange as “A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”
A promise or order to pay is not “conditional”, within the meaning of this section and section 4, by reason of the time for payment of the amount or any installment thereof being expressed to be on the lapse of certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.
The sum payable may be “certain”, within the meaning of this section and section and section4, although it includes future indicated rater of change, or is according to the course of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an installment, the balance unpaid shall become due.
The person to whom it is clear that the direction is given or that payment is to be made may be a “certain person,” within the meaning of this section and section 4, although he is misnamed or designated by description only.
Features of a bill of exchange
1. A bill of Exchange is an instrument in writing
2. The instrument must contain an order to pay, which is express, certain and unconditional.
3. The drawer must be certain.
4. The drawee must be certain
5. The payee must be certain.
6. The in instrument must be duly signed by the drawer.
7. The amount of the money paid must be certain and ascertainable.
8. The payment must be in legal tender money.
9. The money must be payable to a definite person or according to his order.
10. The bill may be payable on demand or after a specified or definite period of time. But no one except the Reserve Bank of India (RBI) and Government of India can draw a bill payable on demand to the bearer of the bill.
11. It must b properly stamped as prescribed by the Indian Stamp Act.
12. It must be dated. The date of the bill necessary for the calculation of the due date of the bill.