The second essential type of presentment for a negotiable instrument is presentment for payment. The specific time and the designated person to whom the holder presents the instrument depend entirely on the maturity date and the specific type of the instrument. Because the primary goal of producing the instrument is to receive the funds, no instrument may be presented for payment before it reaches maturity. Maturity refers to the legal date on which a negotiable instrument falls due.
Maturity and Time of Payment of Bill of Exchange
A holder of a bill of exchange is entitled to demand payment only when the bill is due. If a bill of exchange does not explicitly contain a maturity date, the law deems it payable at sight. Under Article 769 of the Commercial Code of Ethiopia, there are only four recognized categories of maturity:
- At sight
- At a fixed period after sight
- At a fixed period after date
- At a fixed date
The drawer is prohibited from fixing any other maturity dates. For example, a bill drawn payable by installments is legally unacceptable, and such an instrument shall be null and void.
Bill of Exchange Payable at Sight
A bill payable at sight is essentially payable on demand and matures the moment payment is requested. The holder may present it beginning from the day of issuance. According to Article 770, such a bill must be presented for payment within one year of its date. The drawer has the power to either shorten or extend this one-year period, and endorsers may also shorten it.
Additionally, a drawer may stipulate that a sight bill cannot be presented before a fixed date. In this scenario, the one-year period for presentment begins running from that specific date rather than the date of issuance.
Bills of Exchange Payable at a Fixed Period After Sight
For instruments payable at a fixed period after sight, presentment for acceptance is a functional necessity to determine the exact date of payment. Once the date of acceptance is established, the maturity is calculated accordingly.
Under Article 774, the holder must present the instrument for payment either on the day it is payable or on one of the two following business days. If those following days are holidays, the holder may present the bill on the subsequent business days. If the drawee refuses to accept the bill, the payment date is determined by the date of the protest. If the acceptance is given but left undated, it is legally presumed to have been signed on the last day allowed for presentment for acceptance.
Bills Payable After Date or at a Fixed Date
A bill drawn at a fixed period after date matures based on the date of issuance. If a bill is issued "two months after date," the maturity is calculated by counting 60 days from the issuance date. A bill payable at a fixed date simply contains a specific calendar date on which payment is due. Both of these types follow the same rule as bills after sight regarding the window for presentment: payment must be sought on the due date or within the two subsequent business days.
The Drawee’s Obligations and Rights
A drawee who has accepted a bill is the primary party liable. When the bill is presented correctly, the drawee must pay the specified sum. However, the drawee has specific rights under Article 775. Upon payment, the drawee may require the holder to provide a receipt and surrender the physical instrument.
If a drawee is only willing to offer partial payment, the holder is legally required to accept it. In this case, the holder does not surrender the bill, as they still need it to claim the remaining balance from the drawer or endorsers. Instead, the drawee may require that the partial payment be noted on the bill, and the holder must provide a receipt and draw a protest for the unpaid sum.
Payment Before and At Maturity
Under Article 776, a drawee is not required to pay a bill before its maturity, and a holder cannot be compelled to receive payment early. Early payment prevents the holder from further negotiating the instrument and disrupts its natural circulation. Furthermore, a drawee who pays before maturity assumes all associated risks; such payment does not officially discharge the drawee from liability if issues arise.
Conversely, a drawee who pays on the maturity date to a lawful possessor is validly discharged. To ensure they are paying the rightful party, the drawee must verify the regularity of the series of endorsements, though they are not required to verify the authenticity of the endorsers' signatures.
Currency of Payment
In accordance with Article 777, if a debt on a bill of exchange is expressed in a foreign currency, the debtor generally has the option to pay in the local currency that is legal tender at the place of payment, unless specific stipulations require payment in the exact foreign currency mentioned.
How does the legal requirement to accept partial payment protect the secondary parties, such as the drawer and endorsers, from immediate full liability?