A blank bill of exchange, also known as an inchoate
bill of exchange, is a security that is often used to
secure receivables and as their repayment bond. It
replaces cash offered as a deposit. Deciding to apply
this security instrument, we should bear in mind
several points which can protect us from the risk of
the other party using the bill of exchange contrary to
the agreement made.
It is a typical feature of a blank bill of exchange that
it misses at least one of the statutory components of
a traditional bill of exchange, e.g. the person to
whom the liability on the bill is to be paid (payee),
bill of exchange amount, date of payment, etc. These
are completed only after the presentation of the bill
for payment by its holder. Consequently, a blank bill
of exchange can be used to secure receivables whose
amount or date of payment are not yet known at the
time the bill of exchange is drawn. Unfortunately,
this can easily turn against the debtor, should the
holder of the bill of exchange choose to complete it
contrary to the agreement, if only for an amount in excess of the required one. In order to prevent that
from happening, the parties should draw up the so-
called bill of exchange declaration (bill of exchange
agreement) setting out the terms and conditions for
completing the bill. However, for such an agreement
to have any significance, one must bear in mind a
number of important details.
Above all, a blank bill of exchange should not be a
completely blank form with only the drawer’s
signature on it. When the holder of the bill completes
it contrary to the agreement, that would be very hard
to prove despite having concluded the bill of
exchange agreement. This is because, filling in the
missing details, the bill’s holder will in a way draw
up a promissory note. Under such circumstances it is
impossible to demonstrate that it used to be a blank
bill of exchange. However, it is very easy to avoid
these difficulties. One only needs to include on the
bill of exchange all the details known at the time of
drawing: date and place of drawing, currency
symbol, and the designation of the payee. One does
not need to worry that the date of drawing will affect
the bill’s period of limitation, as pursuant to Article
70 of the Bill of Exchange Law (Journal of Laws of
1936, no. 37, item 282, as subsequently amended)
the period of limitation commences on the date of
payment and runs for three years. It is also worth
indicating that the bill of exchange being drawn is a
blank bill of exchange and that the parties have
concluded a bill of exchange agreement, as well as
adding the “not to order” clause. This will prevent
the bill’s payee from endorsing it (assigning rights
arising under it), following which the drawer would
be unable to pursue any claims against the new
holder. In addition, the instrument can state that the
drawer promises to redeem the blank bill of
exchange for a price designated by the payee and on
the date specified by it. The details (maximum
period, amount) can be included in the bill of
exchange agreement, the execution of which is also
stated on the bill of exchange.
On the other hand, one need not enter the drawer on
a blank bill of exchange. If the bill is signed on
behalf of a company, e.g. by one of its shareholders,
it is not sure if on the date of payment the drawer
will still act in the same capacity. A signature affixed
next to a business name, without expressly stating
the capacity to represent the company, does not
mean that the declaration of intent has been made on
behalf of the company and may result in the
signatory’s liability for the company’s obligations
still continuing at a time when he or she no longer has anything to do with the operations of the
business. Under such circumstances, the provisions
of the bill of exchange declaration will be irrelevant.
To determine the identity of the drawer and decide
who contracted obligations under the bill of
exchange, it is important whose signature was
affixed beneath the contents of the bill of exchange
and in what capacity the signatory acted. So to be on
the safe side, it is advisable not to enter these details,
as one cannot be certain whether or not they will
remain unchanged until the bill of exchange payment
date.
An inchoate bill of exchange is a very good way of
securing receivables. It can be employed both in
relations between undertakings, e.g. as security for
receivable arising under various types of agreements,
and in dealings with consumers. The awareness of
the issues outlined above helps make the most of the
advantages offered by this security instrument
without any concerns that the bill might be used
contrary to the agreement.
MILLER, CANFIELD,
W. BABICKI, A. CHEŁCHOWSKI I WSPÓLNICY SP.K.
ul. Batorego 28-32
81-366 Gdynia
Tel. +48 58 782-0050
Fax +48 58 782-0060
gdynia@pl.millercanfield.com
ul. Nowogrodzka 11
00-513 Warszawa
Tel. +48 22 447-4300
Fax +48 22 447-4301
warszawa@pl.millercanfield.com
ul. Skarbowców 23a
53-125 Wrocław
Tel. +48 71 780-3100
Fax +48 71 780-3101
wroclaw@pl.millercanfield.com
Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield. It is intended to provide only a summary
of certain recent legal developments of selected areas of law. For this reason the information contained in this publication should not form the
basis of any decision as to a particular course of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in
individual cases. The services of a competent professional adviser should be obtained in each instance so that the applicability of the relevant
legislation or other legal development to the particular facts can be verified.