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Malaysian Negotiable InstrumentS-Bills of Exchange-Payable on Demand • Fixed Future Time • Determinable Future Time • Sum Certain in Money
Case Scenario
Sarah Furniture Sdn. Bhd. sells furniture worth RM50,000 to Ali Trading Sdn. Bhd.
Sarah draws three different bills of exchange:
Bill A
“Pay Sarah RM50,000 on demand.”
Bill B
“Pay Sarah RM50,000 on 31 December 2026.”
Bill C
“Pay Sarah RM50,000 90 days after sight.”
Ali asks whether all three are valid bills of exchange.
Questions and Answers
Question 1
When may a bill of exchange be payable?
Answer
A bill of exchange may be payable:
Payable on Demand
Question 2
What does “payable on demand” mean?
Answer
A bill payable on demand must be paid immediately when it is presented for payment.
No waiting period is required.
Statutory Provision
Section 10(1) of the Bills of Exchange Act 1949
A bill is payable on demand if it is expressed to be payable:
Examples
Example 1
“Pay Sarah RM10,000 on demand.”
✔ Valid.
Payment is made immediately when Sarah presents the bill.
Example 2
“Pay Sarah RM10,000 at sight.”
✔ Valid.
“At sight” means payment is due when the bill is presented.
Example 3
“Pay Sarah RM10,000 on presentation.”
✔ Valid.
Payment becomes due when the bill is presented.
Example 4
“Pay Sarah RM10,000.”
(No payment date is mentioned.)
✔ Valid.
Because no payment date is stated, the bill is treated as payable on demand.
Fixed Future Time
Question 3
What is a fixed future time?
Answer
A fixed future time means the exact payment date is known when the bill is drawn.
Examples
“Pay Sarah RM20,000 on 31 December 2026.”
✔ Valid.
“Pay Sarah RM20,000 on 1 January 2027.”
✔ Valid.
The payment date is fixed and certain.
Determinable Future Time
Question 4
What is a determinable future time?
Answer
A determinable future time means the exact payment date is not yet known, but the event that determines payment is certain to happen.
Statutory Provision
Section 11(1) of the Bills of Exchange Act 1949
A bill is payable at a determinable future time if it is payable:
Examples
Example 1
“Pay Sarah RM30,000 90 days after the date of this bill.”
✔ Valid.
The exact due date can be calculated.
Example 2
“Pay Sarah RM30,000 60 days after sight.”
✔ Valid.
Payment is due 60 days after the drawee accepts or sees the bill.
Example 3
“Pay Sarah RM30,000 30 days after Ali’s retirement.”
✔ Valid (assuming retirement is certain and only the exact date is unknown).
Contingent Events
Question 5
Can payment depend on an uncertain event?
Answer
No.
If payment depends on an uncertain event, the document is not a bill of exchange.
Statutory Provision
Section 11(2) of the Bills of Exchange Act 1949
A bill payable upon a contingency is not a valid bill of exchange.
Even if the event later happens, the defect is not cured.
Examples
Invalid Example 1
“Pay Sarah RM20,000 if I win the lottery.”
✘ Invalid.
Winning the lottery is uncertain.
Invalid Example 2
“Pay Sarah RM20,000 if my business makes a profit.”
✘ Invalid.
Payment depends on an uncertain event.
Invalid Example 3
“Pay Sarah RM20,000 if I obtain a bank loan.”
✘ Invalid.
Obtaining the loan is uncertain.
Sum Certain in Money
Question 6
What is meant by a “sum certain in money”?
Answer
The amount payable must be clearly ascertainable.
The bill must require payment only in money, and the amount must be capable of being determined.
Statutory Provision
Section 9(1) of the Bills of Exchange Act 1949
A bill still contains a sum certain even though payment is:
Examples
Example 1 – Interest
“Pay Sarah RM10,000 plus 5% interest.”
✔ Valid.
Example 2 – Instalments
“Pay Sarah RM12,000 in 12 monthly instalments of RM1,000.”
✔ Valid.
Example 3 – Acceleration Clause
“Pay Sarah RM12,000 in monthly instalments. If one instalment is missed, the entire balance becomes immediately payable.”
✔ Valid.
Example 4 – Exchange Rate
“Pay Sarah the equivalent of USD10,000 according to the exchange rate stated in the bill.”
✔ Valid.
Invalid Example
“Pay Sarah whatever profit I earn this year.”
✘ Invalid.
The amount is uncertain.
Comparison in Note Form
Payable on Demand
Meaning
Payment is due immediately upon presentation.
Examples
Fixed Future Time
Meaning
The payment date is known when the bill is drawn.
Example
Pay on 31 December 2026.
Determinable Future Time
Meaning
The exact date is unknown initially, but it can be determined because the event is certain to occur.
Examples
Contingency
Meaning
Payment depends on an uncertain event.
Effect
Not a valid bill of exchange.
Examples
Key Examination Notes
Valid Payment Terms
Invalid Payment Terms
Critical Analysis
The Bills of Exchange Act 1949 requires certainty regarding both when payment is due and how much is payable. These requirements promote confidence in commercial transactions because holders can determine their legal rights without depending on uncertain future events.
Practical Applications
These rules commonly apply in:
Short Answer Questions with Answers
1. Which section defines a bill payable on demand?
Answer: Section 10(1) of the Bills of Exchange Act 1949.
2. What does “at sight” mean?
Answer: Payable when the bill is presented.
3. What is a fixed future time?
Answer: A payment date that is known when the bill is drawn.
4. What is a determinable future time?
Answer: A payment date based on an event that is certain to occur, although the exact date may be unknown.
5. Is “Pay if I win the lottery” valid?
Answer: No. It is contingent and therefore not a valid bill of exchange.
6. Which section deals with determinable future time?
Answer: Section 11 of the Bills of Exchange Act 1949.
7. What is a sum certain?
Answer: A clearly ascertainable amount of money payable under the bill.
8. Can a bill include interest?
Answer: Yes.
9. Can a bill be payable by instalments?
Answer: Yes.
10. Can a bill require payment of an uncertain amount?
Answer: No.
Case Scenario
Sarah Furniture Sdn. Bhd. sells furniture worth RM50,000 to Ali Trading Sdn. Bhd.
Sarah draws three different bills of exchange:
Bill A
“Pay Sarah RM50,000 on demand.”
Bill B
“Pay Sarah RM50,000 on 31 December 2026.”
Bill C
“Pay Sarah RM50,000 90 days after sight.”
Ali asks whether all three are valid bills of exchange.
Questions and Answers
Question 1
When may a bill of exchange be payable?
Answer
A bill of exchange may be payable:
- on demand;
- at a fixed future time; or
- at a determinable future time.
Payable on Demand
Question 2
What does “payable on demand” mean?
Answer
A bill payable on demand must be paid immediately when it is presented for payment.
No waiting period is required.
Statutory Provision
Section 10(1) of the Bills of Exchange Act 1949
A bill is payable on demand if it is expressed to be payable:
- on demand;
- at sight;
- on presentation; or
- where no time for payment is stated.
Examples
Example 1
“Pay Sarah RM10,000 on demand.”
✔ Valid.
Payment is made immediately when Sarah presents the bill.
Example 2
“Pay Sarah RM10,000 at sight.”
✔ Valid.
“At sight” means payment is due when the bill is presented.
Example 3
“Pay Sarah RM10,000 on presentation.”
✔ Valid.
Payment becomes due when the bill is presented.
Example 4
“Pay Sarah RM10,000.”
(No payment date is mentioned.)
✔ Valid.
Because no payment date is stated, the bill is treated as payable on demand.
Fixed Future Time
Question 3
What is a fixed future time?
Answer
A fixed future time means the exact payment date is known when the bill is drawn.
Examples
“Pay Sarah RM20,000 on 31 December 2026.”
✔ Valid.
“Pay Sarah RM20,000 on 1 January 2027.”
✔ Valid.
The payment date is fixed and certain.
Determinable Future Time
Question 4
What is a determinable future time?
Answer
A determinable future time means the exact payment date is not yet known, but the event that determines payment is certain to happen.
Statutory Provision
Section 11(1) of the Bills of Exchange Act 1949
A bill is payable at a determinable future time if it is payable:
- at a fixed period after date;
- at a fixed period after sight; or
- after the occurrence of a specified event that is certain to happen, although the exact time is uncertain.
Examples
Example 1
“Pay Sarah RM30,000 90 days after the date of this bill.”
✔ Valid.
The exact due date can be calculated.
Example 2
“Pay Sarah RM30,000 60 days after sight.”
✔ Valid.
Payment is due 60 days after the drawee accepts or sees the bill.
Example 3
“Pay Sarah RM30,000 30 days after Ali’s retirement.”
✔ Valid (assuming retirement is certain and only the exact date is unknown).
Contingent Events
Question 5
Can payment depend on an uncertain event?
Answer
No.
If payment depends on an uncertain event, the document is not a bill of exchange.
Statutory Provision
Section 11(2) of the Bills of Exchange Act 1949
A bill payable upon a contingency is not a valid bill of exchange.
Even if the event later happens, the defect is not cured.
Examples
Invalid Example 1
“Pay Sarah RM20,000 if I win the lottery.”
✘ Invalid.
Winning the lottery is uncertain.
Invalid Example 2
“Pay Sarah RM20,000 if my business makes a profit.”
✘ Invalid.
Payment depends on an uncertain event.
Invalid Example 3
“Pay Sarah RM20,000 if I obtain a bank loan.”
✘ Invalid.
Obtaining the loan is uncertain.
Sum Certain in Money
Question 6
What is meant by a “sum certain in money”?
Answer
The amount payable must be clearly ascertainable.
The bill must require payment only in money, and the amount must be capable of being determined.
Statutory Provision
Section 9(1) of the Bills of Exchange Act 1949
A bill still contains a sum certain even though payment is:
- with interest;
- by instalments;
- by instalments with an acceleration clause; or
- according to a stated exchange rate.
Examples
Example 1 – Interest
“Pay Sarah RM10,000 plus 5% interest.”
✔ Valid.
Example 2 – Instalments
“Pay Sarah RM12,000 in 12 monthly instalments of RM1,000.”
✔ Valid.
Example 3 – Acceleration Clause
“Pay Sarah RM12,000 in monthly instalments. If one instalment is missed, the entire balance becomes immediately payable.”
✔ Valid.
Example 4 – Exchange Rate
“Pay Sarah the equivalent of USD10,000 according to the exchange rate stated in the bill.”
✔ Valid.
Invalid Example
“Pay Sarah whatever profit I earn this year.”
✘ Invalid.
The amount is uncertain.
Comparison in Note Form
Payable on Demand
Meaning
Payment is due immediately upon presentation.
Examples
- On demand.
- At sight.
- On presentation.
- No payment date stated.
Fixed Future Time
Meaning
The payment date is known when the bill is drawn.
Example
Pay on 31 December 2026.
Determinable Future Time
Meaning
The exact date is unknown initially, but it can be determined because the event is certain to occur.
Examples
- 90 days after date.
- 60 days after sight.
Contingency
Meaning
Payment depends on an uncertain event.
Effect
Not a valid bill of exchange.
Examples
- If I win the lottery.
- If I obtain a loan.
Key Examination Notes
Valid Payment Terms
- On demand.
- At sight.
- On presentation.
- At a fixed future date.
- At a determinable future time.
Invalid Payment Terms
- If I get married.
- If I receive my salary.
- If I sell my house.
- If my business makes a profit.
Critical Analysis
The Bills of Exchange Act 1949 requires certainty regarding both when payment is due and how much is payable. These requirements promote confidence in commercial transactions because holders can determine their legal rights without depending on uncertain future events.
Practical Applications
These rules commonly apply in:
- trade credit;
- supplier financing;
- commercial lending;
- banking transactions;
- international trade.
Short Answer Questions with Answers
1. Which section defines a bill payable on demand?
Answer: Section 10(1) of the Bills of Exchange Act 1949.
2. What does “at sight” mean?
Answer: Payable when the bill is presented.
3. What is a fixed future time?
Answer: A payment date that is known when the bill is drawn.
4. What is a determinable future time?
Answer: A payment date based on an event that is certain to occur, although the exact date may be unknown.
5. Is “Pay if I win the lottery” valid?
Answer: No. It is contingent and therefore not a valid bill of exchange.
6. Which section deals with determinable future time?
Answer: Section 11 of the Bills of Exchange Act 1949.
7. What is a sum certain?
Answer: A clearly ascertainable amount of money payable under the bill.
8. Can a bill include interest?
Answer: Yes.
9. Can a bill be payable by instalments?
Answer: Yes.
10. Can a bill require payment of an uncertain amount?
Answer: No.
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