The person to whom a bill is transferred by endorsement is called the endorsee. In the United States the definition is the same, except that an instrument may only be made payable “to order or to bearer.” If the drawee assents to the order and accepts the bill, which is done by signing his name, or his name with the word “accepted,” across the face of the paper, he is called an acceptor. It has been defined in England as an unconditional order in writing addressed by one person to another, signed by the person giving it (the drawer), and requiring the person to whom it is addressed (the drawee) to pay on demand or at a fixed or determinable future time a certain sum of money to, or to the order of, a specified person (the payee) or to the bearer. The most common and most complex form of negotiable instrument is the draft, or bill of exchange.
The buyer may also, although this is not typical for commercial transactions, draw a check on his own bank and send it to the seller. On return of the instrument the seller may use this accepted bill to pay his own debts or may sell it to his bank (discounting).
The buyer or his bank signs the bill as drawee and thereby becomes acceptor. A typical “trade bill” used in connection with an inland or an export sale serves as an example of this: the seller, according to a clause of the contract of sale, may draw a bill on the buyer (that is, prepare a “promise to pay” that the buyer must sign) or, in the case of an overseas buyer, on a bank acting for the buyer, payment to be made within the agreed time (such as 30, 60, or 90 days after delivery). Sometimes one instrument may perform all three functions. Negotiable instruments are used for purposes of payment or credit and as security. These are in fact the most common negotiable instruments in use, and the following discussion will be confined to them. This “negotiability of credit” was facilitated by the development of a variety of negotiable instruments including promissory notes, checks, and drafts (bills of exchange). Thus, a promise of A to pay B a certain sum at a specified date in the future could be used by B to pay a debt to C. The negotiable instrument, which is essentially a document embodying a right to the payment of money and which may be transferred from person to person, developed historically from efforts to make credit instruments transferable that is, documents proving that somebody was in their debt were used by creditors to meet their own liabilities.
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