The French bill of exchange (lettre de change): creation, circulation, and enforcement

The bill of exchange – or traite – is the most widely used negotiable instrument in inter-company relations in France. The deferred payment instrument par excellence, it enables a supplier to give their customer a written order to pay a determined sum at an agreed maturity date, while in the meantime mobilising the claim with their bank. A centuries-old mechanism, still very present in B2B relations, but whose technicality should not be underestimated: a missing particular invalidates the instrument, a missed presentation deadline can destroy all recourse rights.

This guide covers the complete cycle – from creation to incident management – with the relevant articles of the Commercial Code, practical traps, and Cour de cassation case law. It concerns negotiable instruments in their most structured form: the one that binds all its signatories jointly.

What is a bill of exchange?

A three-party mechanism

The bill of exchange organises a triangular legal operation. The drawer (tireur) – generally the creditor, a supplier – gives a written order to the drawee (tire) – their debtor, the customer – to pay a determined sum at an agreed date to the payee (beneficiaire) or holder, who may be the drawer themselves or a third party.

Behind this scheme lie two pre-existing relationships. The first connects the drawer to the drawee: this is the provision – the claim the drawer holds against their customer which justifies the order to pay. The second connects the payee to the drawer: this is the valeur fournie (consideration), for example goods delivered for which the payee has financed the drawer. The bill of exchange substitutes a single payment order for these two flows.

A commercial act by form

The bill of exchange is a commercial act by form, regardless of the parties’ status. Article L. 110-1(10) of the Commercial Code provides that “the law deems bills of exchange to be commercial acts, between all persons”. Whether trader or not, every signatory performs a commercial act.

The consequences are immediate: all negotiable-instrument disputes in principle fall within Commercial Court jurisdiction, the commercial rules of evidence apply, and joint liability between signatories operates by operation of law. A private individual who signs a draft does not become a trader, but their commitment is governed by commercial law.

An important limit: the Consumer Code (Article L. 314-21) prohibits and renders void bills of exchange subscribed by private individuals in the context of consumer credit. The bill of exchange is strictly reserved for professional relationships.

What does it do in practice?

The draft replaces two cash flow streams with a single payment order and secures inter-company credit. By granting a payment period to the customer while enabling the supplier to mobilise their receivables, it reconciles the interests of both parties. Before the maturity date, the payee may discount the bill with their bank – receiving the funds immediately in exchange for a fee – or transmit it to a creditor by endorsement.

The 8 mandatory particulars

The law of negotiable instruments is dominated by rigorous formalism. Each successive holder must be able to ascertain, from reading the instrument alone, the precise extent of their rights and the commitments undertaken. Article L. 511-1(I) of the Commercial Code lists eight particulars whose absence may invalidate the instrument.

Some practical clarifications. The mandate to pay must be unconditional – no condition may be attached to it. If the sum appears in both figures and words and they diverge, the sum in words prevails (Article L. 511-4). The payee must be named: a draft “to bearer” is not valid under French law.

Sanctions for omission

Article L. 511-1(II) is unequivocal: the deficient instrument “does not qualify as a bill of exchange”. The consequence is the loss of the protective regime of negotiable instruments law: no automatic joint liability between signatories, no unenforceability of defences against the good-faith holder, reversion to general-law limitation periods.

The law nonetheless provides three supplementary rules. Absence of maturity means payable on sight. Absence of place of payment is supplemented by the place indicated next to the drawee’s name. Absence of place of creation is supplemented by the place next to the drawer’s name. For the other five particulars – denomination, mandate to pay, name of drawee, name of payee, drawer’s signature – omission in principle invalidates the instrument.

An instrument void as a bill of exchange does not necessarily lose all value. Depending on the particulars present, it may be reclassified as a promissory note, an acknowledgement of debt, or serve as a beginning of written proof.

Optional particulars

Beyond the mandatory particulars, the parties may insert clauses to adapt the draft. The domiciliation clause (Article L. 511-2 paragraph 4) designates a bank as the place of payment – the most common practice. The “without costs” or “return without costs” clause (Article L. 511-43) exempts the holder from protesting to preserve their recourse rights – though it does not exempt from presenting the draft within the prescribed time. The “not to order” clause (Article L. 511-8 paragraph 2) prohibits transfer by endorsement: the instrument can then only circulate by ordinary assignment of claim.

From creation to payment: the draft’s cycle

Provision: the drawer’s claim against the drawee

The provision is the claim the drawer holds against the drawee which justifies issuance of the bill. Unlike a cheque, the provision need not exist at the time of issuance: it must exist at maturity, the date on which payment will be demanded. This distinction is fundamental to cash management: a supplier may issue a draft at the time of delivery even though the price is not yet due.

Acceptance by the drawee creates a presumption of provision. But in the direct relationship between drawer and accepting drawee, the presumption may be rebutted (Cass. com., 2 July 1974, No. 73-12.450). However, vis-a-vis the good-faith holder, the defence of lack of provision is unenforceable – unless the holder acted knowingly in fraud of the drawee’s rights (Cass. com., 18 Oct. 1994, No. 92-17.309).

Acceptance: the drawee’s irrevocable commitment

Acceptance is the act by which the drawee commits to pay the bill at maturity. It takes the form of the word “accepted” or simply the drawee’s signature on the face of the instrument. Once given, it is irrevocable.

Presentation for acceptance is in principle optional for the holder. It becomes mandatory in three cases: for drafts at a certain period after sight (the period runs from acceptance or protest for non-acceptance); where the drawer has expressly required it on the instrument; and where a “against acceptance” clause features in the underlying commercial contract.

In practice, having the draft signed by the customer before remitting it to the bank is always preferable. An unaccepted draft binds only the drawer and endorsers, not the drawee – considerably reducing the instrument’s security.

The lettre de change releve (LCR): the dematerialised version

The lettre de change releve (LCR), standardised by the CFONB (Comite francais d’organisation et de normalisation bancaires), is the electronic version of the draft. The drawer completes a standardised file transmitted to their bank, which transmits it to the drawee’s bank. At maturity, the debit is automatic via the interbank system.

The LCR produces the same legal effects as the paper draft but considerably simplifies operational management: no physical circulation, no postal delays, automatic collection at maturity. In the event of non-payment, the bank sends a non-payment letter that serves as protest for the preservation of recourse rights.

Today, the LCR represents the vast majority of negotiable instruments processed in France.

Guarantees and circulation

Endorsement: transferring or guaranteeing

The bill of exchange is transferable by endorsement – the signature on the reverse, accompanied by the name of the payee. At each endorsement, the successive holder acquires an autonomous right over the instrument, independent of defences the drawee might raise against previous holders.

Two main forms exist. Transferring endorsement (endossement translatif) transfers ownership of the negotiable-instrument claim to the endorsee. Endorsement by procuration charges the endorsee with collecting the draft on behalf of the endorser – the mechanism used upon remittance for bank discount.

The Cour de cassation recalls that the status of legitimate holder requires an unbroken chain of endorsements: an endorsement given after the protest does not confer this status, and the purported holder is then exposed to the debtor’s defences (Cass. com., 24 Nov. 1983, No. 82-13.674).

The aval: the negotiable-instrument guarantor

The aval is the negotiable-instrument guarantee par excellence. A third party – the guarantor – commits to pay the bill if the guaranteed debtor does not. It takes the form of the words “bon pour aval” followed by the signature on the instrument or on an allonge, with indication of the person guaranteed.

The guarantor is bound in the same manner as the person they guarantee (Article L. 511-21 of the Commercial Code). Their liability is autonomous: even if the guaranteed person’s commitment is void for a reason other than a formal defect, the aval remains valid.

Maturity and presentation for payment

The four authorised types of maturity

Article L. 511-22 of the Commercial Code authorises only four forms of maturity. Any other form is void.

• At a fixed date: a precise calendar date inscribed on the instrument. The most common form.
• At a certain period after date: payment due after a period calculated from the date of creation (e.g. “at 90 days from date”).
• At a certain period after sight: the period runs from the date of presentation for acceptance.
• On demand (a vue): payable on presentation to the drawee, within a maximum of one year from creation (Article L. 511-23).

A fundamental principle: the debtor of a bill of exchange cannot obtain judicial payment deferrals – grace periods are excluded (Article L. 511-81).

Presentation for payment: an active obligation on the holder

Unlike an ordinary claim, the holder of a bill of exchange must actively present the instrument for payment. For a draft at fixed date or at a period after date or sight, presentation must be made on the maturity date itself or one of the two following business days (Article L. 511-26).

The trap of holder negligence

This is one of the costliest traps of negotiable instruments law. The holder who fails to present the draft within the statutory time limits loses their recourse against endorsers and against the drawer who furnished provision (Article L. 511-49). They retain their action against the accepting drawee – who remains bound even without protest – and against the drawer who did not furnish provision.

Non-payment: protest, recourse, and joint liability

Protest: officially recording the refusal

The protest (protet) is the official instrument by which a commissaire de justice records that payment has been refused. The protest for non-payment must be drawn up within ten business days following the maturity date.

The drawee’s name is then entered in the public register of protests held by the Commercial Court registry – a concrete and potentially serious consequence for the debtor’s Banque de France rating and commercial reputation.

The “without costs” clause (Article L. 511-43) exempts the holder from protesting to exercise recourse. Where pre-printed on the draft, the drawer’s sole signature suffices to validate it – a second specific signature under the clause is not required (Cass. com., 2 Nov. 2016, No. 15-12.399).

Joint liability of signatories

This is the great strength of the bill of exchange over ordinary means of payment. All signatories – drawer, endorsers, guarantors – are jointly liable to the legitimate holder. The holder may act against them all simultaneously or successively, in no order of preference, for the face amount of the draft plus interest, protest costs, and recovery costs.

The unenforceability of defences is the rule: the good-faith holder receives an autonomous right over the instrument, independent of defects affecting relationships between prior signatories.

Negotiable-instrument limitation

Limitation periods under negotiable instruments law are short and mandatory – they cannot be extended by the court.

• 3 years from maturity for actions against the accepting drawee (Article L. 511-78 of the Commercial Code)
• 1 year from the protest (or maturity in the case of a “without costs” clause) for actions against endorsers and the drawer
• 6 months from payment for recourse between endorsers and against the drawer

Opposition to payment

Unlike a cheque, opposition to payment of a bill of exchange is limited to two cases: loss or theft of the instrument. The debtor cannot oppose payment on the ground of a dispute with the creditor over the underlying contract – this is precisely what negotiable instruments law is designed to prevent.

Bill of exchange, promissory note, cheque: key differences

Criterion	Bill of exchange	Promissory note	Bank cheque
Number of parties	3 (drawer, drawee, payee)	2 (subscriber, payee)	3 (drawer, bank, payee)
Initiative	The creditor (drawer)	The debtor (subscriber)	The account holder
Nature	Order to pay	Promise to pay	Order to pay on sight
Provision timing	At maturity	At maturity	At time of issuance
Credit instrument	Yes (deferred term)	Yes (deferred term)	No (payable on sight)
Discountable	Yes	Yes	No
Interest clause	Possible (on demand or after sight)	Possible	Prohibited
Protest on non-payment	Commissaire de justice	Commissaire de justice	Bank certificate
Governing texts	Arts. L. 511-1 to L. 511-81 C. com.	Arts. L. 512-1 to L. 512-8 C. com.	Arts. L. 131-1 to L. 131-87 Monetary and Financial Code

The principal difference between the bill of exchange and the promissory note lies in the origin of the commitment: in the bill, the creditor takes the initiative and gives an order to their debtor; in the promissory note, the debtor takes the initiative and commits to pay in the form of a negotiable-instrument acknowledgement of debt. Relative to the cheque, the decisive advantage of the draft is that the sum owed need not be available immediately, making it the deferred payment instrument of choice in B2B commercial relationships.