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Malaysian Negotiable Instruments-Bills of Exchange-In Writing • Addressed by One Person to Another • Signed by the Drawer
Case Scenario
Sarah Furniture Sdn. Bhd. sells office furniture worth RM80,000 to Ali Trading Sdn. Bhd. on 90 days’ credit.
Sarah prepares a bill of exchange on her computer, prints it, and signs it before giving it to Ali for acceptance.
Ali argues that the bill is invalid because:
Questions and Answers
Question 1
Must a bill of exchange be in writing?
Answer
Yes.
One of the essential requirements of a valid bill of exchange is that it must be in writing.
If it is not in writing, it is not a valid bill of exchange.
Question 2
What does “writing” mean?
Answer
The law gives the word writing a very broad meaning.
It is not limited to handwriting.
Statutory Provision
Section 3 of the Interpretation Acts 1948 and 1967
The word “writing” includes:
Examples
Example 1
Sarah types a bill of exchange on Microsoft Word and prints it.
✔ Valid.
Example 2
A company prepares its bill using accounting software.
✔ Valid.
Example 3
A printed standard bank form is completed by hand.
✔ Valid.
Example 4
Part of the bill is printed while the amount is written by hand.
✔ Valid.
Question 3
Must a bill be handwritten?
Answer
No.
A bill may be:
Question 4
Can a bill be written in pencil?
Answer
Legally, yes.
However, banks generally discourage or prohibit the use of pencil because it can easily be erased or altered, increasing the risk of fraud.
Example
Sarah writes a bill in pencil.
Although the bill may still satisfy the legal requirement of writing, most banks will refuse to accept it because alterations can easily be made.
Question 5
Can a bill be written on any material?
Answer
Yes.
Provided the material is capable of retaining writing.
Historically, a bill could even be written on:
Example
A company prints a bill on official company letterhead.
✔ Valid.
Question 6
Can a bill be written in any language?
Answer
Yes.
The Bills of Exchange Act does not require the bill to be written in English.
Case Law
Arab Bank Ltd v Ross
Facts
The cheque was written entirely in Arabic.
Decision
The court held that the cheque was still legally valid.
Principle
A bill or cheque may be written in any language provided its legal meaning is sufficiently clear.
Addressed by One Person to Another
Question 7
What does “addressed by one person to another” mean?
Answer
A bill of exchange must contain an order made by one person directing another person to pay.
There must therefore be:
Definitions
Drawer
The person who prepares and signs the bill.
Usually the creditor.
Drawee
The person who is ordered to pay.
Usually the debtor.
Example
Sarah sells furniture worth RM50,000 to Ali.
Sarah prepares a bill ordering Ali to pay.
Sarah is the drawer.
Ali is the drawee.
Question 8
Must the bill contain a formal address?
Answer
No.
The law does not require formal wording such as:
“To Ali Trading Sdn. Bhd.”
Provided the drawee can reasonably be identified, the requirement is satisfied.
Example
A cheque simply displays:
Maybank Berhad
at the top.
When Sarah signs the cheque, she is legally directing Maybank to pay.
No further wording is necessary.
Question 9
Can a company be the drawer or drawee?
Answer
Yes.
The word person includes both:
Example
Sarah Furniture Sdn. Bhd.
draws a bill on
Ali Trading Sdn. Bhd.
Both companies are recognised as legal persons.
Question 10
Can a bill be addressed to more than one drawee?
Answer
Yes.
A bill may be addressed to two or more drawees.
Statutory Provision
Section 6(2) of the Bills of Exchange Act 1949
A bill may be addressed to:
However, it cannot be addressed:
Example (Valid)
Sarah orders:
Ali and Ahmad jointly to pay RM60,000.
Both Ali and Ahmad are drawees together.
✔ Valid.
Example (Invalid)
Sarah writes:
Payable by Ali or Ahmad.
This is an alternative order.
✘ Not a valid bill.
Example (Invalid)
Sarah writes:
Ali shall pay first, and if he fails, Ahmad shall pay.
This is a successive order.
✘ Not a valid bill.
Bank Draft Drawn on Itself
Question 11
Can a bank draw a bill on itself?
Answer
Ordinarily, a bill requires one person to order another person to pay.
Where a bank draws an instrument on itself, this requirement is technically absent.
Statutory Provision
Section 5(2) of the Bills of Exchange Act 1949
The holder may choose to treat such an instrument either as:
Example
Maybank issues a bank draft payable to Sarah.
Although the bank is effectively drawing on itself, Sarah may treat the instrument as either:
Signed by the Person Giving It
Question 12
Why is the drawer’s signature important?
Answer
The drawer’s signature confirms that the drawer authorises the order to pay.
Without the signature, there is no valid bill of exchange.
Statutory Provision
Section 23 of the Bills of Exchange Act 1949
No person is liable as:
Example
Sarah prepares a bill ordering Ali to pay RM40,000.
However, she forgets to sign it.
The document is not enforceable against Sarah because she never authorised it.
Example
Ali later accepts the bill but does not sign his acceptance.
Ali does not become legally liable as the acceptor because acceptance must also be signed.
Malaysian Case
Co-operative Exportvereniging ‘Vecofa’ UA v Maha Syndicate
[1970] 1 MLJ 187
Facts
The defendants accepted three bills of exchange amounting to RM69,750.28.
The bills contained the words:
“At 60 days after sight D/A on arrival of steamer…”
The defendants argued that payment depended upon the arrival of the steamer.
Therefore, they claimed the documents were conditional and not valid bills of exchange.
Issue
Did the words
“on arrival of steamer”
make the order conditional?
Held
No.
The court held that the important words were:
“D/A” (Documents Against Acceptance).
The words relating to the arrival of the steamer merely described the commercial transaction.
Payment was not conditional upon the arrival of the ship.
Therefore, the documents remained valid bills of exchange.
Legal Principle
Merely referring to the underlying commercial transaction does not make a bill conditional.
This is consistent with section 3(3) of the Bills of Exchange Act 1949.
Simple Example
Sarah exports furniture to Japan.
The bill states:
“Pay Sarah RM80,000 sixty days after sight. Documents to be released upon acceptance.”
The reference to shipping documents merely explains how the trade transaction operates.
Payment itself remains unconditional.
The bill is therefore valid.
Comparison in Note Form
In Writing
Meaning
The bill must exist in written form.
Includes
Addressed by One Person to Another
Meaning
One person (drawer) orders another person (drawee) to pay.
Signed by the Drawer
Meaning
The drawer must sign the bill.
Without a signature, the drawer is not liable.
Key Examination Notes
In Writing
Addressed by One Person to Another
Signature
Section 5(2)
A bank draft drawn by a bank on itself may be treated as:
Section 6(2)
Critical Analysis
The Bills of Exchange Act 1949 adopts a practical approach to commercial transactions. Rather than insisting on rigid formalities, the law recognises various methods of writing and permits companies to act as parties to bills of exchange. At the same time, essential safeguards—such as requiring a signature and clearly identifying the parties—ensure certainty and accountability. The decision in Co-operative Exportvereniging ‘Vecofa’ UA v Maha Syndicate further demonstrates that courts focus on the true legal effect of the bill rather than isolated words describing the underlying commercial transaction.
Practical Applications
These requirements are encountered daily in:
Short Answer Questions with Answers
1. Must a bill of exchange be in writing?
Answer: Yes.
2. Which Act defines “writing”?
Answer: The Interpretation Acts 1948 and 1967.
3. Can a bill be typed?
Answer: Yes.
4. Can a company be a drawer?
Answer: Yes.
5. Which section requires the drawer’s signature?
Answer: Section 23 of the Bills of Exchange Act 1949.
6. Can a bill be written in Arabic?
Answer: Yes.
7. Can a bill have two joint drawees?
Answer: Yes, under section 6(2).
8. Can a bill be addressed to Ali or Ahmad alternatively?
Answer: No.
9. What does “D/A” mean?
Answer: Documents Against Acceptance.
10. What was decided in
Co-operative Exportvereniging ‘Vecofa’ UA v Maha Syndicate
?
Answer: A reference to the arrival of the steamer did not make the bill conditional. The documents remained valid bills of exchange.
Case Scenario
Sarah Furniture Sdn. Bhd. sells office furniture worth RM80,000 to Ali Trading Sdn. Bhd. on 90 days’ credit.
Sarah prepares a bill of exchange on her computer, prints it, and signs it before giving it to Ali for acceptance.
Ali argues that the bill is invalid because:
- It was typed rather than handwritten.
- It does not contain the words “To Ali Trading Sdn. Bhd.”
- It was signed electronically before being printed.
Questions and Answers
Question 1
Must a bill of exchange be in writing?
Answer
Yes.
One of the essential requirements of a valid bill of exchange is that it must be in writing.
If it is not in writing, it is not a valid bill of exchange.
Question 2
What does “writing” mean?
Answer
The law gives the word writing a very broad meaning.
It is not limited to handwriting.
Statutory Provision
Section 3 of the Interpretation Acts 1948 and 1967
The word “writing” includes:
- handwriting;
- typewriting;
- printing;
- lithography;
- photography;
- electronic storage;
- electronic transmission; and
- any other method of recording information capable of being preserved.
Examples
Example 1
Sarah types a bill of exchange on Microsoft Word and prints it.
✔ Valid.
Example 2
A company prepares its bill using accounting software.
✔ Valid.
Example 3
A printed standard bank form is completed by hand.
✔ Valid.
Example 4
Part of the bill is printed while the amount is written by hand.
✔ Valid.
Question 3
Must a bill be handwritten?
Answer
No.
A bill may be:
- handwritten;
- typed;
- printed; or
- partly printed and partly handwritten.
Question 4
Can a bill be written in pencil?
Answer
Legally, yes.
However, banks generally discourage or prohibit the use of pencil because it can easily be erased or altered, increasing the risk of fraud.
Example
Sarah writes a bill in pencil.
Although the bill may still satisfy the legal requirement of writing, most banks will refuse to accept it because alterations can easily be made.
Question 5
Can a bill be written on any material?
Answer
Yes.
Provided the material is capable of retaining writing.
Historically, a bill could even be written on:
- paper;
- cloth;
- wood;
- slate; or
- stone.
Example
A company prints a bill on official company letterhead.
✔ Valid.
Question 6
Can a bill be written in any language?
Answer
Yes.
The Bills of Exchange Act does not require the bill to be written in English.
Case Law
Arab Bank Ltd v Ross
Facts
The cheque was written entirely in Arabic.
Decision
The court held that the cheque was still legally valid.
Principle
A bill or cheque may be written in any language provided its legal meaning is sufficiently clear.
Addressed by One Person to Another
Question 7
What does “addressed by one person to another” mean?
Answer
A bill of exchange must contain an order made by one person directing another person to pay.
There must therefore be:
- a drawer; and
- a drawee.
Definitions
Drawer
The person who prepares and signs the bill.
Usually the creditor.
Drawee
The person who is ordered to pay.
Usually the debtor.
Example
Sarah sells furniture worth RM50,000 to Ali.
Sarah prepares a bill ordering Ali to pay.
Sarah is the drawer.
Ali is the drawee.
Question 8
Must the bill contain a formal address?
Answer
No.
The law does not require formal wording such as:
“To Ali Trading Sdn. Bhd.”
Provided the drawee can reasonably be identified, the requirement is satisfied.
Example
A cheque simply displays:
Maybank Berhad
at the top.
When Sarah signs the cheque, she is legally directing Maybank to pay.
No further wording is necessary.
Question 9
Can a company be the drawer or drawee?
Answer
Yes.
The word person includes both:
- natural persons; and
- legal persons such as companies.
Example
Sarah Furniture Sdn. Bhd.
draws a bill on
Ali Trading Sdn. Bhd.
Both companies are recognised as legal persons.
Question 10
Can a bill be addressed to more than one drawee?
Answer
Yes.
A bill may be addressed to two or more drawees.
Statutory Provision
Section 6(2) of the Bills of Exchange Act 1949
A bill may be addressed to:
- two or more drawees jointly,
However, it cannot be addressed:
- alternatively; or
- successively.
Example (Valid)
Sarah orders:
Ali and Ahmad jointly to pay RM60,000.
Both Ali and Ahmad are drawees together.
✔ Valid.
Example (Invalid)
Sarah writes:
Payable by Ali or Ahmad.
This is an alternative order.
✘ Not a valid bill.
Example (Invalid)
Sarah writes:
Ali shall pay first, and if he fails, Ahmad shall pay.
This is a successive order.
✘ Not a valid bill.
Bank Draft Drawn on Itself
Question 11
Can a bank draw a bill on itself?
Answer
Ordinarily, a bill requires one person to order another person to pay.
Where a bank draws an instrument on itself, this requirement is technically absent.
Statutory Provision
Section 5(2) of the Bills of Exchange Act 1949
The holder may choose to treat such an instrument either as:
- a bill of exchange; or
- a promissory note.
Example
Maybank issues a bank draft payable to Sarah.
Although the bank is effectively drawing on itself, Sarah may treat the instrument as either:
- a bill of exchange; or
- a promissory note.
Signed by the Person Giving It
Question 12
Why is the drawer’s signature important?
Answer
The drawer’s signature confirms that the drawer authorises the order to pay.
Without the signature, there is no valid bill of exchange.
Statutory Provision
Section 23 of the Bills of Exchange Act 1949
No person is liable as:
- drawer;
- indorser; or
- acceptor,
Example
Sarah prepares a bill ordering Ali to pay RM40,000.
However, she forgets to sign it.
The document is not enforceable against Sarah because she never authorised it.
Example
Ali later accepts the bill but does not sign his acceptance.
Ali does not become legally liable as the acceptor because acceptance must also be signed.
Malaysian Case
Co-operative Exportvereniging ‘Vecofa’ UA v Maha Syndicate
[1970] 1 MLJ 187
Facts
The defendants accepted three bills of exchange amounting to RM69,750.28.
The bills contained the words:
“At 60 days after sight D/A on arrival of steamer…”
The defendants argued that payment depended upon the arrival of the steamer.
Therefore, they claimed the documents were conditional and not valid bills of exchange.
Issue
Did the words
“on arrival of steamer”
make the order conditional?
Held
No.
The court held that the important words were:
“D/A” (Documents Against Acceptance).
The words relating to the arrival of the steamer merely described the commercial transaction.
Payment was not conditional upon the arrival of the ship.
Therefore, the documents remained valid bills of exchange.
Legal Principle
Merely referring to the underlying commercial transaction does not make a bill conditional.
This is consistent with section 3(3) of the Bills of Exchange Act 1949.
Simple Example
Sarah exports furniture to Japan.
The bill states:
“Pay Sarah RM80,000 sixty days after sight. Documents to be released upon acceptance.”
The reference to shipping documents merely explains how the trade transaction operates.
Payment itself remains unconditional.
The bill is therefore valid.
Comparison in Note Form
In Writing
Meaning
The bill must exist in written form.
Includes
- handwriting;
- typing;
- printing;
- electronic recording.
Addressed by One Person to Another
Meaning
One person (drawer) orders another person (drawee) to pay.
Signed by the Drawer
Meaning
The drawer must sign the bill.
Without a signature, the drawer is not liable.
Key Examination Notes
In Writing
- Required by law.
- Any form capable of permanent recording is sufficient.
Addressed by One Person to Another
- Requires a drawer and drawee.
- Companies may be parties.
- Formal wording is unnecessary.
Signature
- Essential for liability.
- Governed by section 23.
Section 5(2)
A bank draft drawn by a bank on itself may be treated as:
- a bill of exchange; or
- a promissory note.
Section 6(2)
- Joint drawees ✔
- Alternative drawees ✘
- Successive drawees ✘
Critical Analysis
The Bills of Exchange Act 1949 adopts a practical approach to commercial transactions. Rather than insisting on rigid formalities, the law recognises various methods of writing and permits companies to act as parties to bills of exchange. At the same time, essential safeguards—such as requiring a signature and clearly identifying the parties—ensure certainty and accountability. The decision in Co-operative Exportvereniging ‘Vecofa’ UA v Maha Syndicate further demonstrates that courts focus on the true legal effect of the bill rather than isolated words describing the underlying commercial transaction.
Practical Applications
These requirements are encountered daily in:
- banking operations;
- commercial lending;
- domestic credit sales;
- import and export transactions;
- documentary letters of credit.
Short Answer Questions with Answers
1. Must a bill of exchange be in writing?
Answer: Yes.
2. Which Act defines “writing”?
Answer: The Interpretation Acts 1948 and 1967.
3. Can a bill be typed?
Answer: Yes.
4. Can a company be a drawer?
Answer: Yes.
5. Which section requires the drawer’s signature?
Answer: Section 23 of the Bills of Exchange Act 1949.
6. Can a bill be written in Arabic?
Answer: Yes.
7. Can a bill have two joint drawees?
Answer: Yes, under section 6(2).
8. Can a bill be addressed to Ali or Ahmad alternatively?
Answer: No.
9. What does “D/A” mean?
Answer: Documents Against Acceptance.
10. What was decided in
Co-operative Exportvereniging ‘Vecofa’ UA v Maha Syndicate
?
Answer: A reference to the arrival of the steamer did not make the bill conditional. The documents remained valid bills of exchange.
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