A bill of exchange is redeemable by a payment made to the holder on or after its maturity

A bill of exchange is a document that belongs to the category of securities and is a means of securing credit and servicing transactions. The only signature required for its validity is that of the principal. If the issuer’s signature is not there, then the document cannot be a bill of exchange, nor does it create liability for the person who may have signed it as a guarantor.

The issuer’s signature is essential for the validity of a bill of exchange and without it no action can be brought against the recipient or issuer thereof. Also, if it orders any act to be done in addition to the payment of money or does not meet the conditions mentioned in its definition, it is not a bill of exchange.

Rebuttable presumption in favour of the holder

‘Holder’ means the beneficiary or the person in whose favour the bill of exchange is endorsed and who has it in his possession, or its bearer.

The holder of a bill of exchange is prima facie deemed to have given a valuable consideration for it. The law therefore creates a rebuttable presumption in favour of the holder that he has given consideration for its issuance, the rebuttal of which rests with the person who invokes the lack of consideration.

Any party whose signature appears on the bill of exchange is prima facie deemed to have become a part thereof. But if in an action for a bill of exchange it is admitted or proved that the acceptance, issue or subsequent transfer thereof is affected by fraud, duress, violence, fear or illegality, the burden of proof is shifted, unless the holder proves that, after the alleged fraud or illegality, a bona fide value has been given to the bill of exchange.

The bill of exchange is paid by or on behalf of the payer by payment made on or after its expiration to the holder.

A bill of exchange is not void because it is not dated, does not specify the value given, or does not specify the place at which it is issued or the place where it is to be paid. The payee must be named or stated on a bill of exchange with reasonable certainty, as must the payee when it is not payable to the bearer.

When the bill of exchange contains words prohibiting its transfer, then it is not transferable. A bill of exchange can be payable either to order or to the bearer.

Supreme Court decision

The Supreme Court in its decision issued in C.A.261/2015, dated July 26, examined the correctness of the decision of the court of first instance which rejected the claim of the appellant company by which she was entitled to the amount of €60.000 by virtue of a bill of exchange.

The respondent in his defence pleaded that the bill of exchange was signed by him as a result of coercion or fraud and without him receiving any consideration.

The court of first instance ruled that the issuance of the bill of exchange by the respondent-defendant, as well as its possession by the appellant, had not been disputed.

Examining the question of consideration which had been contested, he did not accept the position of the respondent that the bill of exchange was signed as a result of coercion or the exercise of fraud.

However, it rejected the action, judging that the defendant, by purchasing an apartment from the appellant, paid specific amounts to her and that by paying them, he dropped the burden he had to disprove the rebuttable presumption of the existence of consideration.

The Supreme Court found this decision to be wrong, since the alleged circumstances of the signing of the disputed bill of exchange were rejected by the first instance court.

On the other hand, with the payment by the respondent of specific sums, which were actually paid before the issue of the bill of exchange in question, the respondent had not discharged the burden it bore to disprove the rebuttable presumption of the existence of consideration.

Nor was it ever his version that he did not owe anything to the appellant because the impugned bill of exchange had been paid on the basis of specific payments made subsequent to its issuance. In view of the non-overthrow of the rebuttable presumption in favour of the holder, the court annulled the first instance decision and issued a judgment against the appellant for the amount of the bill of exchange, plus legal interest and costs.

George Coucounis is a lawyer specialising in Immovable Property Law, based in Larnaca. E-mail: [email protected], tel: 24818288