Drawn Bill of Exchange
Regarding the drawn (draft) bill of exchange, bill of exchange law recognizes the classical – regular draft and the drawn promissory note. The difference between them lies in the fact that a regular draft is drawn on a third party (the drawee – a person different from the drawer), while in a drawn promissory note, the drawer draws the bill on himself (the drawer and the drawee are the same person).
In practice, there have even been cases where certain payees require that the drawer of a draft bill of exchange draw the bill on himself and also accept it. This effectively means that a single person acts as the drawer, the drawee, and the acceptor, which makes such bills drawn promissory notes in substance, even though they are formally structured as drafts.
The essential elements of a draft and a promissory note are the same, except that a promissory note does not include a drawee, as such a party cannot exist by the nature of the instrument.
At the time of issuance, a bill of exchange may be fully completed or may contain only the signature of the drawer or issuer. Such bills are referred to as "blank bills" (incomplete bills). With regard to blank bills, the Law on Bills of Exchange does not explicitly contain specific provisions; however, judicial practice applies, by analogy, paragraph 2 of Article 18 of the Law on Bills of Exchange, which provides for the possibility of issuing a bill that is incomplete at the time of issuance.
A blank bill is valid only if it has been signed by the drawer, i.e., the issuer of the promissory note. A blank bill is not considered a bill of exchange in the legal sense until all essential elements have been completed by the authorized holder. It becomes a legally valid bill only when the authorized person fills in the bill’s content.
Blank bills are commonly used in commercial practice due to the issuer’s inability to complete the bill at the time of issuance, often due to lack of information such as the due date or the amount of the debt. They are most frequently used as a means of securing payment of future obligations that are not yet fully determined at the time of issuance.
Such blank bills are especially prevalent in banking operations, where the issuer and the payee (remittee) agree—within the main contract and/or a special promissory note statement—that the remittee is authorized to complete the bill with the missing information in order to exercise their rights.
Between the moment the bill is issued based on the underlying legal transaction and the moment of collection through the bill, the amount of debt may vary—either reduced due to partial repayment, or increased due to accrued interest. Therefore, it is important that the bill creditor (the holder of the blank bill) is allowed to subsequently enter the bill amount and the due date, especially in cases where the debtor fails to fulfill their obligations.
A blank bill that is not accompanied by a promissory note statement (in which the issuer authorizes the holder to complete the bill with the missing details) is invalid and legally null. Accordingly, when concluding agreements that aim to secure performance of obligations by the bill debtor, it is crucial to exercise caution in issuing the bill and clearly defining the authority of the bill holder.
If you require expert assistance with the issuance of bills of exchange; drafting of promissory note statements; completing bills at the time of issuance; completing bills during debt collection before banks or courts; transferring rights from a bill to third parties (endorsement); or with other actions related to bill of exchange law, please contact an attorney.
Protect your rights arising from a bill of exchange, as mistakes made during its issuance, completion, or the execution of bill-related actions cannot be corrected later.
Question:
Can a bill of exchange containing the "without protest" clause be considered an enforceable document? That is, can enforcement proceedings be initiated directly on the basis of a bill of exchange bearing the "without protest" clause, even if it has not been protested?
Answer:
Only a bill of exchange that has been protested (with the protest issued by the competent court) constitutes an enforceable document on the basis of which enforcement proceedings may be initiated.
Question:
Before initiating a protest of a bill of exchange before the competent court, is the holder of the bill required to first attempt collection from the bill debtor?
Answer:
In its 2012 decision, the Constitutional Court of Bosnia and Herzegovina upheld the rulings of lower-instance courts which established the obligation of the bill holder to attempt collection of the bill before initiating a protest.
To learn about the ways in which an attempt to collect the bill from the bill debtor can be proven—an essential step for the issuance of a bill protest—please contact an attorney.
Question:
Should blank promissory notes, for which the bill debtor has granted the bill creditor written authorization to complete, be considered payable at sight bills, for which the Law on Bills of Exchange prescribes a statute of limitations of one year from the date of issuance?
For example, under a loan agreement dated May 15, 2015, the lender agreed to the repayment of the loan amount with interest in a lump sum on May 15, 2020. As a means of securing repayment, the borrower issued a blank promissory note and granted written authorization to the lender to complete the bill in the manner specified in the bill authorization.
In such a case, was the lender required to complete the blank bill and initiate proceedings before the court within one year from the date of issuance, i.e., no later than May 15, 2016, in accordance with Article 108, paragraph 1 of the Law on Bills of Exchange, in conjunction with Articles 34–38 of the same Law?
Answer:
The Supreme Court of Republika Srpska, in a 2021 ruling, established several legal positions regarding the status of blank promissory notes, including their maturity. Likewise, the Supreme Court of the Federation of Bosnia and Herzegovina, in a 2014 ruling, expressed its legal opinion on the status of blank promissory notes and the applicable maturity deadlines.
Question:
Can a standardized blank draft bill of exchange, whose format and content are prescribed by the competent entity authority (Ministry of Finance), also be used for issuing promissory notes, for which no official form has been prescribed?
Answer:
The Supreme Courts of both entities have provided identical answers to this question in their legal opinions and rulings.
Question:
If the maturity date on a blank bill of exchange is not entered in accordance with the bill authorization or the underlying legal transaction, does this affect the validity of the bill?
Answer:
In the legal opinion of the Supreme Court of Republika Srpska, it was stated that this circumstance does not affect the legal validity of the bill of exchange, provided that the incorrect entry of the maturity date does not impact the statute of limitations for the bill claim.
Question:
If, at the time of issuing a blank bill of exchange, the bill debtor (drawer) did not provide a bill authorization – a statement authorizing the bill creditor to complete the bill – and no agreement on the manner of completing the bill exists, what is the legal status of such bills? Are they null and void solely due to the absence of a bill authorization or agreement, or is their validity (completion) assessed based on other criteria?
Question:
How and within what time limits is the issuer of a promissory note liable? What are the statute of limitations periods applicable to promissory notes?
Question:
To whom is a bill of exchange presented for payment, i.e., who is the principal bill debtor in a draft bill of exchange where a drawer, drawee, and acceptor are all present?
Question:
To whom is a draft bill of exchange first presented for payment — the drawer or the drawee?
Question:
Can the issuer of a bill of exchange, which was subsequently endorsed to a third party, raise an objection against the endorsee (the third party to whom the bill was transferred) on the grounds that the bill was not properly completed or was not completed in accordance with the underlying agreement, if no bill authorization or agreement on completion exists?
Question:
Can the issuer of a bill of exchange, which has been subsequently endorsed to a third party, raise an objection against the endorsee (the third party to whom the bill was transferred) that the bill was not completed in accordance with the bill authorization or the agreement on its completion?
Question:
Is a bill of exchange issued by a legal entity valid if it contains the company’s name, registered office, and the signature of the director, but does not bear the company’s official stamp?
Question:
Is a bill of exchange valid if issued by a natural or legal person, when the signature of the individual — either the natural person or the director of the legal entity — is illegible?
Question:
Is a bill of exchange issued by a legal entity valid if, next to the name of the drawer, only a company stamp is affixed — containing the name of the legal entity — without handwritten entry of the company name, address, or registration number, and it includes the signature of the authorized representative?
Question:
When can a (blank) bill of exchange be considered a bill payable at sight, which the payee must present for payment within one year from the date of issuance?
If you require an answer to any of the questions listed above, or if you have another question or dilemma regarding how to proceed in a specific situation, please contact an attorney.
