A bill of exchange presented for payment may be settled by the drawee in full or in part. Depending on the amount paid, the drawee may claim the physical bill or a formal receipt. The currency used for settlement is generally ordered by the drawer or provided by law when foreign elements are involved.
Rights and Duties Under Article 775
Article 775 outlines the specific rights and duties of both the holder and the drawee regarding the delivery of the instrument and the remaining balance. A drawee who pays a bill in full may require that the instrument be surrendered to them, properly receipted by the holder. This surrendered bill serves as evidence that the drawee has discharged their obligation.
Crucially, a holder may not refuse partial payment. If the drawee offers only a portion of the total sum, the holder must accept it. In this case, the drawee may require that the payment be noted on the bill and that a separate receipt be provided. Because the sum is only partially settled, the holder does not surrender the bill; they retain it to seek the remaining balance from the drawer or endorsers. To do so, the holder must protest the bill for the unpaid remainder.
Opposition to Payment
Under Article 779, payment of a bill of exchange may only be opposed in two specific circumstances: the loss of the bill or the bankruptcy of the holder. If a holder is declared bankrupt, payments should be made to the trustees in bankruptcy rather than the holder directly. Outside of these grounds, the drawee is generally expected to effect payment to the lawful possessor.
Payment in Foreign Currency
Article 777 governs situations where a bill is drawn in a currency different from that of the place of payment. Generally, the sum may be settled in the local currency of the place of payment according to its value on the date of maturity.
If the debtor defaults, the holder has the option to demand payment in local currency calculated at the rate existing either on the maturity date or the day of actual payment. However, if the drawer stipulated a specific exchange rate within the bill (e.g., "pay at the rate of 1:50"), that fixed rate must be used. Furthermore, if the drawer includes a "provision for payment in foreign currency," the debtor must pay in that specific currency and cannot opt for local tender.
In cases where the currency name is the same but the value differs between countries—such as a bill issued in Canada but paid in the USA using "Dollars"—the law deems the reference to be the currency of the place of payment (the US Dollar in this instance).
Payment by Intervention
Payment by intervention occurs when a third party or a specified person steps in to pay a bill to prevent it from being dishonored, typically when the holder's right of recourse matures. This can happen at maturity or even before maturity if the bill was not accepted.
The holder is not strictly compelled to receive payment from an intervention payer. However, if the holder refuses such payment, they lose their right of recourse against any parties who would have been discharged by that payment. When an intervention payment is made, it must be for the full amount. The intervening payer then receives the bill and the protest, allowing them to exercise the rights of the party for whose honor they paid against those liable to that party.
Categories of Maturity
According to Article 769, a bill of exchange can only be drawn with one of four types of maturity. Any other maturity type, such as payment by installments, renders the bill null and void. The permitted types are:
- At sight (payable on demand)
- At a fixed period after sight
- At a fixed period after date
- At a fixed date
A bill payable at sight matures the moment it is demanded. Under Article 770, it must be presented within one year of its date, though the drawer may extend or shorten this period.
Obligations Regarding Presentment and Surrender
As per Articles 774 and 775, once a bill reaches maturity, the holder must present it for payment. For bills with a fixed maturity date, this must be done on the due date or within the two following business days. The drawee is not required to pay before maturity, and the holder cannot be forced to accept early payment.
A drawee who pays at maturity to a holder who appears to be a lawful possessor is validly discharged. To ensure this, the drawee must verify the regularity of the series of endorsements but is not responsible for verifying the authenticity of the signatures of the endorsers.
How does the mandatory acceptance of partial payment benefit the circulation of commercial paper and the overall stability of the credit system?