2. Describe the process of discounting a bill of exchange.

A holder of a bill may wish to sell it before the due date for payment. In the case of a
bill made to order, the seller will indorse it (that is, sign their name on the back) and
deliver it to the buyer. In the case of a bearer bill it is transferable simply by delivery.
The purchase price of the bill will be less than its face value this discount reflects
the interest rate which will increase according to risk and time.
When the bill becomes due, the present holder presents it for payment and will be paid
the full face value of the bill (the difference from what was paid for the bill is called
the yield).
For example. A bill of exchange with a face value of $1,000,000 and payable in 60
days can be sold to a third party at a discount if for example the holder needs the
money immediately which is a common reason why the holder would discharge the
bill early. The buyer will buy this at say a $50,000 discount for $950,000. To calculate
the yield, you do 50,000/1,000,000 = 5% yield in 60 days. Then after 60 days, if not
sold again, the purchaser can present the bill and collect the $1,000,000 from the
acceptor.

4. What is the nature of the acceptors liability under the bill?

Before answering this question, we should define what an acceptor is as this can be
confusing. The acceptor is the third party who accepts responsibility for payment in a
bill of exchange drawn upon it. The bill of exchange will generally have three parties:
the drawor, the drawee and the acceptor. The simplest example of an acceptor is say
for example, Jack owes you $20,000 and a few weeks later you want to by a car. You
then go to Toyota and find a car worth $20,000. You then instruct Jack to pay Toyota
$20,000 and when he accepts a bill drawn against him and assumes responsibility for
payment of the bill he becomes the acceptor. When Toyota wants to receive payment
for the car you just bought, they then go to jack and demand him give them $20,000
pursuant to the conditions of the bill which you drew against jack instructing to pay
Toyota if the bill is payable on demand. If its payable in 30 days, then Toyota must
wait 30 days for payment.
And thus the liabilities are entrenched in statute under the Bills of Exchange Act 1909.
Under s 59, an acceptor, after accepting a bill is precluded from denying to a holder in
due course the existence of the drawer, the genuineness of his or her signature, and
that they have capacity to act of the drawer and payee but can deny the validity of
indorsements.
Similar preclusions apply under s 60 under which drawers and indorsers are unable to
deny the existence or capacity of their transferees (the payee and drawer).
Strangers who sign a bill otherwise than as a drawer or acceptor become liable as an

indorser to a holder in due course (s 61).

Who is entitled to the benefit of the acceptors liability under the bill?
Any holder who, without fraud, derives title through a holder in due course has all the
rights of a holder in due course with respect to the acceptor and all parties to the bill
prior to that holder (s 34(3)).

6. Describe the means by which the liabilities under a bill of exchange are brought to
an end.
A bill of exchange is discharged by:
payment in due course when a bill is paid at or after its maturity to the holder
of it in good faith and without notice of any defect in their title to the bill
(Bills of Exchange Act 1909 (Cth), s 64(1));
acceptor becoming holder in their own right, at or after the bill's maturity
(s 66); for example, if the bill instructs the acceptor to pay $10,000 in 30 days
to Mark, and Mark needs some money now to pay off his credit card, then
Mark can indorse the bill and sell it to Mark for $8,000 and if at the end of the
30 days, Mark still is still the holder, then that bill is discharged.
express waiver if the holder renounces their rights absolutely and
unconditionally in writing against the acceptor (s 67);
cancellation by the holder apparent on the face of the bill (s 68);
alteration made without the assent of all the parties liable; the bill is avoidable
except against the party who made, authorised or assented to the alteration,
and subsequent holders (s 69).

8. What is the major difference between a cheque and a bill of exchange?

The primary difference between a cheque and other bills of exchange is that In the
case of a cheque, a drawee or paying financial institution is obliged to pay the cheque
that arises as part of the relationship between financial institutions and their
customers. The relationship between the customer and the financial institution is
governed by contract. In the case of a bill of exchange, the obligation arises from the
acceptance of the bill. A cheque must be drawn on a financial institution, while a bill
of exchange can be drawn on anyone other than the drawer.