Question

1. Which of the following are payment instruments (demand of payment document) that are required, by the banks, to

be presented when payment is under a documentary collection method of payment? (Multiple answers permitted)

 B/L (Bill of Lading)  B/E (Bill of Exchange)  Bank Cheque  Sight Draft

 Term Draft  All of these  None of these

2. Explain what ‘Bills of Exchange’ are.

Answer 1

1) Bill of Lading and Bill of exchange are 2 payment instruments required by the banks.

Bill of Lading - is a doucument which gives the right to the buyer to gain the possession of goods and it is best used for ocean shipments. When the bill of lading is presented to the bank it is the duty of the buyer to make the payment in order to be the possessor of the goods.

Bills of exchange - When the seller ships the product they issue a bill of exchange and all the further processes are done through a bank. So the shipment arrives the buyer is notified of the same and is told to make the payment and present all the documents in order to gain the possession of goods.

2)A bill of exchange is a bill which actually is given to the buyer so that he is bound to make the payment in order to gain the possession of the goods and all these processes are done through a bank so the buyer has to make the payment to the bank which in turn will make the payment to the seller.