Question 10

What is meant by renewal of a bill of exchange?


Sometimes, the acceptor of a bill finds himself unable to meet the bill on the due date. In such a case, he may request the holder of the bill to cancel the original bill and draw a new bill in place of the old one. If the holder agrees, a new bill will be drawn either for the full amount of the old bill or for the balance Amount in case of patiala payment by the acceptor. In such a case, the drawer normally charges interest for the period of the new bill. The interest may be paid in cash or as is more common, may be added in the amount of the new bill.

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