Free Bill of Exchange Generator

What a bill of exchange actually is

A bill of exchange — a draft, in bank usage — is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay a fixed sum of money on demand or at a determinable future time. That definition is not decorative: it is close to the wording of the UK Bills of Exchange Act 1882, and its equivalents run through the civil-law tradition that Egypt's Commercial Code (Law 17 of 1999) inherits for commercial papers. Every clause of it does work. "Unconditional" means the draft may not say "pay if the goods arrive sound" — the moment you condition it, it stops being negotiable and becomes an ordinary contract term. "Fixed sum" means the amount cannot be "the invoice value", it must be a number. "Determinable future time" is why a tenor of "when the buyer resells" is void while "60 days after Bill of Lading date" is good.

Three parties sit on the instrument. You are the drawer: you draw it, you sign it, and you are liable on it. The drawee is the party ordered to pay — under a documentary credit that is the issuing or nominated bank, and under a documentary collection it is the buyer. The payee is whoever is ordered to be paid, and on an export draft that is you again, which is why the body reads "pay to the order of" your own legal name. You then endorse it on the back to your bank, and that endorsement is what lets the bank negotiate, discount or collect it.

The words "for value received" carry weight too. They record that consideration has moved — that you shipped something — and in most jurisdictions a holder in due course takes the instrument free of most defences between you and the buyer. That is the whole commercial point of a draft as opposed to an invoice: an invoice is a claim you have to sue on, while a draft is an instrument a bank will buy from you. Once your bank has discounted an accepted usance draft, you have cash and the bank has the paper.

What has to be on it — and why the words matter more than the figures

A draft carries the amount twice: once in figures and once written out in words. This is not redundancy for its own sake. Under UCC §3-114 in the United States, and under the equivalent rule almost everywhere the instrument travels, where the words and the figures contradict each other the WORDS control. A typo in the words is therefore not a cosmetic error — it is the operative amount of the instrument. This tool refuses to let the two diverge: you type the number once and the document writes out the words from it, so the figure and the amount in words are one fact rendered twice — they cannot disagree, because a single number lies behind both.

Beyond the sum, the instrument needs: the tenor, stated as a definite time or as payable on demand (UCC §3-104 requires a fixed amount, §3-108 the definite time); the drawee, named unambiguously; the drawer, identified by legal name rather than by a bare "Authorised Signatory", because the drawer is the person liable on the paper; the place and date of drawing; a reference to what the draft is drawn under; and a signature. An unsigned draft is a piece of paper. Note that the signature block is deliberately left blank on the PDF — a printed name and a title are things a human writes and signs, not something a generator asserts on your behalf.

The tenor deserves particular care because it is the field that most often gets rewritten in translation. "At sight" means payable on presentation. "30 days after sight" runs from the drawee's acceptance, so the clock does not start until the draft is physically presented and accepted. "60 days after Bill of Lading date" runs from a date printed on a different document entirely — which is precisely why it is the safest maturity to agree, since neither party can move it. Copy the credit's tenor wording character for character. A draft that says "60 days from B/L" against a credit that says "60 days after Bill of Lading date" is inviting an examiner to make a decision you did not need them to make.

You will notice the document prints twice: FIRST of Exchange and SECOND of Exchange, each stating that the other of the same tenor and date being unpaid. That is a bill in a set, and it is not a photocopy. The pair exists so the two halves can travel by different routes — one with the documents, one separately — against loss in international post. Whichever is honoured first extinguishes the other. Sign both, then separate them and route them as your bank's collection instruction directs.

Drawn under a credit, or under a collection

The same instrument does two very different jobs depending on what it is drawn under, and the "Drawn under" line is what tells the bank which. Under a documentary credit governed by UCP 600, the credit itself states whether it is available by sight payment, deferred payment, acceptance or negotiation (Art. 6(b)). Where it is available by acceptance or by negotiation, the credit calls for a draft, and the draft is drawn on a bank. UCP 600 Art. 6(c) is explicit that a credit must not be issued available by a draft drawn on the applicant. If your credit asks you to draw on the buyer, the credit is defective — raise it with the advising bank before you ship, not after.

Under a documentary collection governed by URC 522 there is no bank undertaking at all. Your bank forwards your draft and documents to the buyer's bank with a collection instruction, and the buyer's bank releases the documents either against payment (D/P — the buyer pays and gets the bill of lading) or against acceptance (D/A — the buyer signs the draft accepting it, gets the documents, and pays at maturity). D/A is the exposure everyone underestimates: you have handed over title to the goods in exchange for a signature. The comfort is that an accepted draft is now an instrument the acceptor is directly liable on, which is a far stronger position than an unpaid invoice — but it is not a bank's promise.

This matters for what you write on the paper. Under a credit, the drawee is the issuing or nominated bank and the draft references the credit number and issue date. Under a collection, the drawee is the buyer and the draft references the collection instruction and the underlying contract. Leave the "Drawn under" field blank under a credit and the document prints the L/C number from the credit section; leave it blank with no credit and it prints "Documentary collection per URC 522". That default is right only if the draft really is drawn under a collection — if the sale is on open account or the buyer has already paid, there is no collection, so state the true basis (the sales contract, say) in that field rather than let the draft assert one. URC 522 also expects the collection instruction to give specific instructions regarding protest — noting a dishonour before a notary — so if protest matters to you, it belongs in the collection instruction your bank raises, not on the face of the draft.

How drafts fail, and what they must agree with

The draft is the shortest document in the presentation and it generates a disproportionate share of discrepancies, for one reason: it is the document people fill in last, in a hurry, after the goods have already sailed. Under UCP 600 Art. 14(a) a bank examines a presentation on its face to determine whether the documents appear to constitute a complying presentation, and Art. 14(d) sets the standard — data need not be identical to the credit, but must not conflict with it. A tenor that paraphrases the credit's tenor conflicts. A drawee named as a branch the credit does not name conflicts. An amount that exceeds the credit's available balance conflicts, and no tolerance saves you unless the credit granted one.

The classic failures are dull and expensive. Drawing on the applicant, because someone copied last year's collection draft into a credit presentation. An amount that does not match the commercial invoice, because a discount or a freight adjustment moved the invoice after the draft was typed. A missing signature, because the operator signed the FIRST and filed the SECOND unsigned. Words and figures that disagree, which is why this tool derives one from the other and gives you no way to introduce the error. A currency code on the draft that is not the credit's currency — sterling for a credit in dollars is obvious; USD on a credit denominated in EUR because the exporter's price list is in dollars is the one that actually happens.

The draft also has to sit correctly inside the rest of the pack. Its amount ties to the commercial invoice, which under UCP 600 Art. 18 must be issued by the beneficiary, made out in the name of the applicant and in the same currency as the credit. Its "days after B/L date" tenor ties to the date on the transport document. Its reference line ties to the order number and the commercial invoice, which is how a collecting bank matches a lone draft that arrived by courier to a set of documents that arrived by SWIFT. If you also send a beneficiary certificate or a bills-for-collection schedule, every one of those documents states the same draft number, and they must all say the same thing.

One last practical point: sign the draft, then check the signature. The document leaves the drawer's printed name, title and date blank on purpose, because UCC §3-204 and its equivalents ask who is legally liable on the instrument, and "Authorised Signatory" over an illegible scrawl answers nobody's question. Write the name. It costs four seconds and it is the difference between an instrument and a decorated invoice.

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