Bill of Exchange- real?

[Kimokeo]

I've seen the Bill of Exchange mentioned on the Protestor page and wondered...

Are they real financial instruments? I've seen the phony ones - but were they ever really honest documents and are they still used today?

[notorial dissent]

As CaptainKickback says, a BOE or whatever variation the delusional come up with is in final balance a draft, or basically a fancy IOU that is supposed to be drawn on some bank or person. They once were quite common in trade when there was no way to move funds easily between buyer and seller.

I seriously doubt if they are even in use anymore, I know they were somewhat common until into the 70's by some of the businesses I dealt with, and after having to fight with my bank once too often to get them cleared I, along with the rest of the business world, quit accepting them. What is the point of accepting something you have to pay to collect, can only enforce for payment by going to court, and then only if the drawer has funds.

Why mess with this relic when you can have funds wired or electronically transferred same day any more. No reason on earth, except the same illogic that thinks a seriously out of date legal dictionary trumps standing law.

[fortinbras]

Bills of Exchange still exist in the business world, but the real bills of exchange do not resemble the amateurish make believe bills being touted on the crank websites. Those do not even fit the legal criteria of genuine bills of exchange and are not acceptable under the UCC.

[notorial dissent]

OK, I’ll bite. Under what conditions, and for what purpose would anyone modernly use a BOE? And I would like an example.

[Prof]

Focus for a minute on the concept of the "draft." A draft is a demand instrument (an instrument payable on demand) drawn on a non-bank. For years, "share draft accounts" were drawn on your deposits at credit unions. These were thru a bank. (This means that a bank has agreed to handle the presentment/payment process; i.e., treat the draft as if it were a check, actually drawn on a the processing bank.)

I still notice "drafts" from time to time -- that is a draft on an entity payable tru a bank. If I recall correctly, many of the cash rebate offers are honored by drafts drawn on the company but payable tru a bank.

All drafts are generally identical to "bills of exchange." The draft states that the payor will pay the payee "on demand" "$ X" or "Pesos X" or "Yen X." However, a draft not payable tru a bank must be presented to the Payor or some established agent in order to be cashed.

In terms of accetability, a draft/Bill is no different from a note. If you hold a note under the terms of which Payor agrees to pay "$x" at "%X" on or before "Dec. 15, XXXX," that note is worth from $0" to "$n." The value depends on the name of the Payor and the terms.

So, yes, drafts are still used, although rarely, and have value and utility in some transactions.

[ASITStands]

Are "Letters of Intent" still used, and are they similar to "Bills of Exchange?"

[Nikki]

There's a vast difference.

Letters of intent are used by high school seniors to lock in athletic scholarships.

Bills of exchange are used to even out salary cap issues after trades between professional teams.

[Prof]

Are "Letters of Intent" still used, and are they similar to "Bills of Exchange?"

Letters of intent are pre-contract agreements or agreements that the parties expect to enter into a contract upon the happening of certain events. These letters of intent are not promises to pay but promises to contract.

[ASITStands]

Are "Letters of Intent" still used, and are they similar to "Bills of Exchange?"

Letters of intent are pre-contract agreements or agreements that the parties expect to enter into a contract upon the happening of certain events. These letters of intent are not promises to pay but promises to contract.

When I studied the NASDAQ Series 6 Exam, I remember something about a "letter of intent" (and something else) being used by companies engaged in international trade. There was the potential for these documents being traded as a security, and hence covered by regulation.

I had thought that was a "bill of exchange." Maybe not.

[notorial dissent]

Prof, I will agree with you here to a point. The draft information is spot on. Share drafts were and are similar to what banks are calling demand deposits now, and while in the early days they had to be processed through a specific bank, that didn't last long and they were soon going though the FED as a regular process item, the only way you could tell the difference between a real "check" and a "share draft" was by looking at the ABA that was on the bottom, there are separate classes for different types of institutions.

Mostly all irrelevant to the discussion at hand. Drafts have to be sent as collection items primarily, and so a fee is charged somewhere in the cycle for collection from the paying bank or entity, although to technically be a draft it has to go through a financial institution of some kind. A BOE, is basically an IOU, and has to be presented in some fashion to the entity it is drawn against, and there is generally no middleman, and again, as I said previously, the only way of enforcing one is to go to court.

A letter of intent is a contract or statement of intent to actually enter into a contractual agreement.

I think what Asitstands was trying for was a "Letter of Credit", which is an entirely different animal. It is a binding agreement by (usually) a financial institution to provide credit up to a certain limit to a person or business. They are still quite commonly used in business transactions. Basically here, you take the letter to the local bank you will be using, present it, they contact the issuing bank for verification, and then will stand credit up to the amount of the letter, and the issuing bank will then reimburse the local bank. It is an easy way to carry large sums of money that you may not need. They are not transferable as a rule, so they have no value to anyone other than the entity it is made out to, so unlike a check if they get lost or stolen they have no value.

My question to fortinbras was for a modern example of a BOE, I would like to see what a modern one consists of since my experience is strictly historical. And I find it hard to fathom how or why they could possibly have any real modern usage.

[ASITStands]

I think what Asitstands was trying for was a "Letter of Credit", which is an entirely different animal. It is a binding agreement by (usually) a financial institution to provide credit up to a certain limit to a person or business. They are still quite commonly used in business transactions. Basically here, you take the letter to the local bank you will be using, present it, they contact the issuing bank for verification, and then will stand credit up to the amount of the letter, and the issuing bank will then reimburse the local bank. It is an easy way to carry large sums of money that you may not need. They are not transferable as a rule, so they have no value to anyone other than the entity it is made out to, so unlike a check if they get lost or stolen they have no value.

Aha! I see it now. Another senior moment on my part. Thanks.