{"id":18378,"date":"2026-04-16T14:37:34","date_gmt":"2026-04-16T13:37:34","guid":{"rendered":"https:\/\/solent-avocats.com\/guides\/droit-commercial\/lettre-de-change\/"},"modified":"2026-04-16T14:37:35","modified_gmt":"2026-04-16T13:37:35","slug":"bill-of-exchange","status":"publish","type":"page","link":"https:\/\/solent-avocats.com\/en\/guides\/droit-commercial\/lettre-de-change\/","title":{"rendered":"Bills of exchange"},"content":{"rendered":"

The bill of exchange - or draft - is the\u2019paper instrument<\/strong> the most common form of payment used in business-to-business relations in France. A deferred payment instrument par excellence, it enables a supplier to give its customer a written order to pay a specified sum of money on an agreed due date, while in the meantime mobilising the receivable with its bank. This age-old mechanism is still very much in evidence in B2B relationships, but its technicalities should not be underestimated: a missing reference invalidates the instrument, and a missed presentation deadline can result in the loss of all recourse.<\/p>\n

This guide covers the entire cycle - from creation to incident management - with articles from the French Commercial Code, practical pitfalls and case law from the Cour de cassation. It covers commercial paper<\/a> in their most structured form: those that commit all signatories jointly and severally.<\/p>\n

What is a bill of exchange?<\/h2>\n

A three-player mechanism<\/h3>\n

The bill of exchange organises a triangular legal transaction. The shooter<\/strong> - usually the creditor, a supplier - gives the written order to the drawn<\/strong> - its debtor - the customer - to pay a specified sum on a date agreed in advance. beneficiary<\/strong> or bearer, who may be the drawer himself or a third party.<\/p>\n

Behind this schema lie two pre-existing relationships. The first links the shooter to the target: it is the provision<\/em>, This is the claim that the drawer has on his customer and which justifies the order to pay. The second links the beneficiary to the drawer: it is the value provided<\/em>, The bill of exchange replaces these two flows with a single payment order. The bill of exchange replaces these two flows with a single payment order.<\/p>\n

The letter may also link only two people, in particular when the drawer designates himself as the beneficiary, as authorised by article L. 511-2 of the French Commercial Code. This is often the case in banking practice.<\/p>\n

A commercial deed in form<\/h3>\n

A bill of exchange is a commercial document in form, regardless of the parties. Article L. 110-1, 10\u00b0 of the French Commercial Code states that \"The law deems bills of exchange to be commercial transactions between all persons.<\/em>. Whether they are traders or not, all signatories are performing a commercial act.<\/p>\n

The consequences are immediate: any dispute arising from a bill of exchange will in principle be heard by the commercial court, the rules of commercial evidence will apply, and the joint and several liability of the signatories will apply. An individual who signs a bill of exchange does not become a merchant, but his or her commitment is governed by commercial law.<\/p>\n

An important limitation: the French Consumer Code (article L. 314-21) prohibits and renders null and void bills of exchange taken out by private individuals as part of consumer credit. Bills of exchange are strictly reserved for business relationships.<\/p>\n

What does it actually do?<\/h3>\n

The bill of exchange replaces two cash flows with a single payment order and secures inter-company credit. By granting the customer a payment period while allowing the supplier to mobilise its receivables, it reconciles the interests of both parties. Before the due date, the beneficiary can discount the bill of exchange with its bank - obtain the funds immediately in return for a commission - or pass it on to a creditor by endorsement. The mechanics of discounting<\/a> is inextricably linked to that of the slave trade.<\/p>\n

Its use has declined with the development of the assignment of trade receivables (Dailly Act) and the legal ceilings on inter-company payment periods introduced by the LME Act. However, in repeated commercial relationships between companies, particularly in the industrial and agri-food sectors, the draft remains a central tool for managing cash flow and financing working capital requirements.<\/p>\n

The 8 compulsory items on bills of exchange<\/h2>\n

Cambiary law is dominated by rigorous formalism. Each successive bearer must be able to know, simply by reading the instrument, the exact extent of his or her rights and commitments. Article L. 511-1, I of the French Commercial Code lists eight items whose absence may invalidate the instrument.<\/p>\n

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Article L. 511-1, I of the French Commercial Code - the 8 references<\/div>\n

The bill of exchange contains: 1\u00b0 the name \u00abbill of exchange\u00bb inserted in the text itself; 2\u00b0 the pure and simple mandate to pay a specific sum; 3\u00b0 the name of the drawee; 4\u00b0 the due date; 5\u00b0 the place of payment; 6\u00b0 the name of the beneficiary; 7\u00b0 the date and place of creation; 8\u00b0 the signature of the drawer.<\/p>\n

Source : L\u00e9gifrance - Art. L. 511-1 to L. 511-81 of the French Commercial Code<\/a><\/p>\n<\/p><\/div>\n

A few practical details. The order to pay must be pure and simple<\/em> - no conditions may be attached. If the amount appears both in figures and in words and there is a discrepancy, the amount in words prevails (article L. 511-4). The beneficiary must be named: a \u00abbearer\u00bb draft is not valid under French law.<\/p>\n

Penalties for omissions<\/h3>\n

Article L. 511-1, II is unequivocal: the defaulting title \u00abnot valid as a bill of exchange\u00bb<\/em>. The consequence is the loss of the protective regime of the law of exchange: no more automatic joint and several liability between signatories, no more unenforceability of defences against a holder acting in good faith, and a return to the limitation periods of ordinary law.<\/p>\n

However, the law provides for three suppletive rules. The absence of a due date is deemed to be a due date at sight. The absence of a place of payment is replaced by the place indicated next to the name of the drawee. The absence of a place of creation is replaced by the place next to the drawer's name. For the other five indications - name, mandate to pay, name of the drawee, name of the beneficiary, signature of the drawer - omission in principle invalidates the instrument.<\/p>\n

A document that is invalid 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 prima facie evidence in writing. Under strict conditions, case law also allows an initially incomplete bill to be regularised before it is presented for payment, provided that this regularisation has been agreed between the parties.<\/p>\n

Optional information for adapting the title<\/h3>\n

In addition to the compulsory terms, the parties can insert clauses to adapt the contract to their needs. The direct debit clause<\/strong> (article L. 511-2, paragraph 4) designates a bank as the place of payment, which facilitates interbank payments and is the most common practice. The free of charge\u00ab or \u00bbfree return\u00ab clause\u00bb<\/strong> (article L. 511-43) exempts the bearer from having a protest drawn up in the event of non-payment in order to preserve his rights of recourse - it does not, however, exempt him from presenting the draft within the time limit. The not to order\u00ab clause\u00bb<\/strong> (article L. 511-8, paragraph 2) prohibits transmission by endorsement: the instrument can then only circulate by ordinary assignment of debt, with all the exceptions that this allows the debtor.<\/p>\n

From creation to payment: the draft cycle<\/h2>\n

The provision: the drawer's claim on the drawee<\/h3>\n

The provision is the claim that the drawer has on the drawee and which justifies the issue of the bill. Unlike cheques, the provision in a bill of exchange does not have to exist at the time of issue: it must exist on the due date, the date on which payment will be required. This feature is fundamental to cash management: a supplier may issue a bill of exchange at the time of delivery, even though the price is not yet due.<\/p>\n

Acceptance by the drawee creates a presumption of provision. However, in the direct relationship between the drawer and the drawee acceptor, the presumption may be rebutted by evidence to the contrary (Cass. com., 2 July 1974, no. 73-12.450). On the other hand, with regard to a bearer acting in good faith, the defence of lack of provision is unenforceable - unless the bearer has acted knowingly in fraud of the drawee's rights (Cass. com., 18 Oct. 1994, no. 92-17.309).<\/p>\n

Acceptance: the drawee's irrevocable commitment<\/h3>\n

Acceptance is the act by which the drawee undertakes to pay the bill on the due date. It is evidenced by the word \u00abaccepted\u00bb or simply by the drawee's signature on the front of the bill. Once it has been affixed, it is irrevocable: the drawee who has accepted can no longer withdraw by deleting his signature before presentation for payment.<\/p>\n

In principle, presentation on acceptance is optional for the bearer. It becomes compulsory in three cases: for bills with a certain sight period (the period runs from acceptance or protest in the absence of acceptance); when the drawer has expressly stipulated it on the bill; and when a clause \u00abagainst acceptance\u00bb appears in the underlying commercial contract.<\/p>\n

In practice, it is always preferable to have the draft signed by the customer before handing it over to the bank. An unaccepted draft only binds the drawer and endorsers, not the drawee - which considerably reduces the security of the instrument.<\/p>\n

LCR (lettre de change relev\u00e9): the dematerialised version<\/h3>\n

La bill of exchange statement<\/strong> (LCR), standardised by the CFONB (Comit\u00e9 fran\u00e7ais d'organisation et de normalisation bancaires), is the electronic version of the bill of exchange. The drawer fills in a standardised file that is sent to his bank, which transmits it electronically to the drawee's bank. On the due date, the bill is debited automatically via the interbank system.<\/p>\n

The LCR has the same legal effects as a paper draft, but considerably simplifies operational management: no physical circulation of the document, no postal delays, automatic collection on the due date. In the event of non-payment, the bank sends a letter of non-payment which serves as a protest for the preservation of recourse.<\/p>\n

Today, LCRs account for the vast majority of commercial paper processed in France. Companies that continue to use paper drafts are exposed to longer processing times and risks of loss or alteration of the document.<\/p>\n

Guarantees and circulation of the draft<\/h2>\n

Endorsement: transfer or guarantee<\/h3>\n

Bills of exchange are transferable by endorsement - the signature on the back of the document, together with the name of the beneficiary. This is one of the major features of the law of bills of exchange: with each endorsement, the successive bearer acquires a right of his own to the instrument, independent of any exceptions that the drawee might raise against previous bearers.<\/p>\n

There are two main forms of endorsement. Translative endorsement<\/strong> transfers ownership of the claim to the endorsee, who becomes the new rightful holder with all the related rights. Endorsement of power of attorney<\/strong> (or \u00abby power of attorney\u00bb) instructs the endorser to cash the bill on behalf of the endorser - this is the mechanism used in bank discounting.<\/p>\n

The Court of Cassation points out that the status of legitimate bearer presupposes a regular series of endorsements: an endorsement affixed after the protest does not confer this status, and the alleged bearer is then subject to the debtor's objections (Cass. com., 24 Nov. 1983, no. 82-13.674). Similarly, a clause \u00abnot to order\u00bb expressly stipulated in the instrument precludes any transmission by endorsement: acceptance by the drawee does not constitute agreement to a subsequent endorsement (Cass. com., 9 Apr. 2013, no. 12-14.133).<\/p>\n

Downstream: the collateral guarantor<\/h3>\n

A guarantee is the most important form of collateral security. A third party - the guarantor - undertakes to pay the bill if the guaranteed debtor fails to do so. It is evidenced by the words \u00abbon pour aval\u00bb (\"good for guarantee\") followed by the signature on the document or on an allonge, indicating the person guaranteed.<\/p>\n

The guarantor is liable in the same way as the person for whom he has given a guarantee (article L. 511-21 of the French Commercial Code). The guarantor's liability is autonomous: even if the guarantor's undertaking is null and void for a reason other than a formal defect, the guarantee remains valid. It is the equivalent of a joint and several guarantee, with the difference that the guarantor cannot invoke the benefit of discussion or any exception based on fundamental relationships.<\/p>\n

In practice, the guarantee is widely used in relations with debtors whose creditworthiness is uncertain, or when the bank discounting the bill requires additional security.<\/p>\n

Due date and presentation for payment<\/h2>\n

The four types of authorised maturity<\/h3>\n

Article L. 511-22 of the French Commercial Code authorises only four forms of maturity. Any other form is null and void.<\/p>\n