Acceptance of Bill | Conditions for Valid Acceptance

When is a bill considered accepted?

The acceptance of a bill is the indication of courtesy extended by the drawee or his/her agent towards the order of the drawer. A bill is said to have been accepted when its drawee signs across the face of the bill with or without writing the word ‘accepted‘ and delivering it back to the holder or separately giving him a note of his acceptance. The drawee of a bill incurs no liability on any bill addressed to him for payment until gives his/her acceptance and thereby becomes the acceptor thereof.

A refusal to accept gives the holder (payee) no right against the drawee. However, the holder in such a situation can give notice of dishonour and sue the drawer or endorser straight away, i.e., without waiting for the date of maturity of the bill.

Conditions for Valid acceptance of Bill

In order to be valid, an acceptance must fulfill the following conditions. It must

  • be in writing
  • duly signed by the acceptor
  • apparent on the instrument
  • after signing be (the instrument) delivered back to the holder
  • absolute and unconditional
  • made by drawee only

1. Must be in Writing: The drawee of a bill should give his assent by putting his signature on the bill. An oral promise will not do. However, writing the word ‘accepted‘ is not essential and thus mere acceptor’s signatures shall be enough to indicate the acceptance.

2. Duly signed by the acceptor: Signature of the acceptor is necessary not only to constitute a valid acceptance but also to make the acceptor or drawee liable on the bill. If the acceptor does not sign, the acceptance will be rendered invalid even though he/she writes the word ‘accepted‘ in his own handwriting.

3. Apparent on the Instrument: Acceptance must be made on the face or back of the instrument either by writing the word ‘accepted‘ followed by acceptor’s signature or by merely signing. Acceptance should not be given on its (instrument’s) replica, copy, or any attached slip of paper, called Allonge.

4. Instrument must be delivered back: The drawee / acceptor after giving their assent to pay the amount as mentioned in the bill must return the instrument back to the drawer/endorser.

5. Absolute and Unconditional: The acceptor must agree to pay the amount as mentioned in the instrument in full without any condition or limitation. In case of conditional acceptance, the holder may treat the negotiable instrument dishonored.

6. Made by drawee only: A bill of exchange is accepted by the drawee only. In case of more than one drawee, acceptance made by one or more drawees, but not by all, is also a qualified acceptance. In such a case the holder may treat the bill dishonored for non-acceptance. However, in case of partnership, due to agency relationship, acceptance by one partner amounts to acceptance by all or the firm.