BILL OF EXCHANGE AS A SECURITY INSTRUMENT FOR CONTRACTS IN THE ECONOMY

Abstract

Even though it was created as a means of exchange, the bill of exchange has over its history expanded its functions in order to become one of the most efficient and most frequently used security instruments for payables. The bill of exchange is used as a security instrument in debtor-creditor relations as a quarantee that the debt will actually be paid. Its fundamental advantage is the speed of collection. Namely, the grounds for the origin of the debt are not visible, and they do not need to be proven in case of a lawsuit. Possession of the bill of exchange presents proof that the drawee of the bill of exchange has assumed the liability and is obliged to fulfill his obligation. However, besides its great flexibility, the bill of exchange is strictly a formal security. It must be drafted in precicesly defined form and must contain all of the elements prescribed by Law. The strictness of the bill of exchange regards both the the drawee and the trustee as untimely performance of either actions concerning the bill of exchange can cause serios legal repercussions for both parties in the bill of exchange relationship.