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Difficulty: MediumMeans of Payment in Home Trade

A Lagos manufacturer sells goods on credit to an Ibadan trader and draws an inland bill of exchange for the transaction value. Once the Ibadan trader writes 'accepted' and signs across the face of the document, which role do they formally assume in this payment mechanism?

  1. The drawee who becomes the acceptor legally bound to pay the bill at maturityAnswer
  2. B
    The drawer who creates and issues the unconditional payment order
  3. C
    The payee who is entitled to collect the funds specified on the instrument
  4. D
    The endorser who transfers ownership of the instrument to a third party bank

Answer

The drawee who becomes the acceptor legally bound to pay the bill at maturity
In home trade transactions involving an inland bill of exchange, the buyer (debtor) to whom the order is directed is the drawee. When the drawee writes 'accepted' and signs the face of the instrument, they formally become the acceptor, incurring the primary legal liability to settle the specified sum on maturity.

Step-by-Step Solution

1
Identify the primary parties involved in a bill of exchange transaction in home trade
The manufacturer (seller/creditor) is the drawer, and the Ibadan trader (buyer/debtor) is the drawee.
Bills of exchange are credit instruments drawn by creditors upon their debtors.
2
Analyze the legal effect of writing 'accepted' and signing the bill
By accepting the bill, the drawee acknowledges the obligation and becomes the acceptor.
Until acceptance, the drawee is not legally bound; upon acceptance, they become primarily liable for payment on maturity.

Key Concept

Parties and roles in an inland bill of exchange (Drawer, Drawee/Acceptor, Payee)
Estimated Time:1m 0s
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Topics

Means of Payment in Home Trade

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