Rafed English

Explanation of Bill of Exchange

2872. A thing either carries real value such as edibles or face value such as currency notes, loan, purchase and sale etc. The difference is that in the case of sale a person is made the owner of a property against the payment of a particular price. and in the case of loan the property is given into the ownership of a person on his responsibility i.e. the debtor becomes responsible for payment of the particular quantity of the commodity or if the transfer takes place against price he becomes responsible to pay its price. The second difference is that, in the event of sale, there must be difference between the thing sold and its price, but this is not necessary in the case of loan. For example it 100 eggs are sold against 110 eggs there must be difference between these eggs (e.g. they may be bigger or smaller), otherwise, although the exchange has taken place apparently in the form of purchase and sale, in reality, it is an interest bearing loan, and, therefore, unlawful. The third difference is that, in the case of loan if the conditions of excess payment is imposed the transaction becomes unlawful on account of interest, and it makes no difference whether or not the thing given on loan is one of those things which are sold by weighing or measuring. However, it is not so in the case of sale. If the things which are sold by weighing or measuring in exchange of the same commodity with an excess, it is interest, but otherwise it is not interest. For example, if a person gives 100 eggs as loan to be repaid with 110 eggs the transaction is not lawful, but if he sells them one against the other the transaction is in order. provided that there is difference between them. The fourth difference between loan and transaction is that selling with interest makes the entire transaction void, but in the case of interest bearing loan the :transaction about the excess amount only is void, and the principal amount of loan is in order.

2873.As the currency notes are not sold by weighing or measuring the creditor can sell the loan in cash at a price less than the real amount. for example, he can sell a loan of $10 for $ 9 in cash or a loan of $ 100 for $ 90 in cash.

2874.The bill of exchange', which is current among the businessmen, does not carry any value by itself, but it is used as a sort of evidence because the price of the goods is not treated to be paid on furnishing a bill of exchange, and if it is lost, the goods belong to the buyer and he is responsible to pay their price. However, if the price of the goods is paid in the shape of currency notes and those notes are lost by the seller of notes the buyer is not responsible to pay the price of the goods again.

2875. The bills of exchange are of two kinds.

(i) A bill of exchange which is the proof of real loan.

(ii) A bill of exchange which is the proof of an unreal loan. In the first case the creditor can sell a loan payable on demand for a less amount of cash. For example he can sell a loan of $ 100 payable after one month for $ 80 in cash. On the basis of obligatory precaution, however, it is not permissible that the bill of exchange be sold for a limited time and then the bank or some other person may demand the amount from the lender (as it is not permissible to sell a loan on loan). In the second case when a bill of exchange is the proof of an unreal loan, the lender cannot sell it for cash, because in this the person giving the bill of exchange does not actually " anything, and it is just like a pay order given on a non-debtor. This is so because in this case the person giving the fill of exchange is not in fact a debtor but has given a pay order on the bank in the name of the man. obtaining the bill of exchange, to enable him to get loan from the bank. As the person giving the bill of exchange has signed it himself, the bank will, so to say. realize its dues from him on the due date by way of pay order on behalf of the person obtaining the bill of exchange from him, although he (the person giving the bill of exchange) is not already the bank's debtor. Now if the bank takes wages for realizing the amount of such a bill of exchange, it will not be lawful for it to do so, as this will amount to an interest bearing loan. However, one method to avoid interest can be that the realization of the price of the bill of exchange may be treated to be sale. For example, the person giving the bill of exchange may make the person obtaining the bill of exchange his agent. and authorize him to sell it at a lower price, and it must also be ensured that there is difference between the thing to be exchanged i.e. the price of the bill of exchange should not be in the currency mentioned in the bill of exchange. However, if there is no difference between the things to be exchanged this method, too, will not hold good But if the bank treats the amount reduced from the price of the bill of exchange to be its wages for the services rendered by it and later the person giving the bill of exchange realizes its full price from the person obtaining this bill of exchange, the deal will be in order.

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