A blank bill of exchange, also known as an inchoate bill of exchange, is a security that is often used to secure receivables and as their repayment bond. It replaces cash offered as a deposit. Deciding to apply this security instrument, we should bear in mind several points which can protect us from the risk of the other party using the bill of exchange contrary to the agreement made.

It is a typical feature of a blank bill of exchange that it misses at least one of the statutory components of a traditional bill of exchange, e.g. the person to whom the liability on the bill is to be paid (payee), bill of exchange amount, date of payment, etc. These are completed only after the presentation of the bill for payment by its holder. Consequently, a blank bill of exchange can be used to secure receivables whose amount or date of payment are not yet known at the time the bill of exchange is drawn. Unfortunately, this can easily turn against the debtor, should the holder of the bill of exchange choose to complete it contrary to the agreement, if only for an amount in excess of the required one. In order to prevent that from happening, the parties should draw up the so- called bill of exchange declaration (bill of exchange agreement) setting out the terms and conditions for completing the bill. However, for such an agreement to have any significance, one must bear in mind a number of important details.

Above all, a blank bill of exchange should not be a completely blank form with only the drawer’s signature on it. When the holder of the bill completes it contrary to the agreement, that would be very hard to prove despite having concluded the bill of exchange agreement. This is because, filling in the missing details, the bill’s holder will in a way draw up a promissory note. Under such circumstances it is impossible to demonstrate that it used to be a blank bill of exchange. However, it is very easy to avoid these difficulties. One only needs to include on the bill of exchange all the details known at the time of drawing: date and place of drawing, currency symbol, and the designation of the payee. One does not need to worry that the date of drawing will affect the bill’s period of limitation, as pursuant to Article 70 of the Bill of Exchange Law (Journal of Laws of 1936, no. 37, item 282, as subsequently amended) the period of limitation commences on the date of payment and runs for three years. It is also worth indicating that the bill of exchange being drawn is a blank bill of exchange and that the parties have concluded a bill of exchange agreement, as well as adding the “not to order” clause. This will prevent the bill’s payee from endorsing it (assigning rights arising under it), following which the drawer would be unable to pursue any claims against the new holder. In addition, the instrument can state that the drawer promises to redeem the blank bill of exchange for a price designated by the payee and on the date specified by it. The details (maximum period, amount) can be included in the bill of exchange agreement, the execution of which is also stated on the bill of exchange.

On the other hand, one need not enter the drawer on a blank bill of exchange. If the bill is signed on behalf of a company, e.g. by one of its shareholders, it is not sure if on the date of payment the drawer will still act in the same capacity. A signature affixed next to a business name, without expressly stating the capacity to represent the company, does not mean that the declaration of intent has been made on behalf of the company and may result in the signatory’s liability for the company’s obligations still continuing at a time when he or she no longer has anything to do with the operations of the business. Under such circumstances, the provisions of the bill of exchange declaration will be irrelevant. To determine the identity of the drawer and decide who contracted obligations under the bill of exchange, it is important whose signature was affixed beneath the contents of the bill of exchange and in what capacity the signatory acted. So to be on the safe side, it is advisable not to enter these details, as one cannot be certain whether or not they will remain unchanged until the bill of exchange payment date.

An inchoate bill of exchange is a very good way of securing receivables. It can be employed both in relations between undertakings, e.g. as security for receivable arising under various types of agreements, and in dealings with consumers. The awareness of the issues outlined above helps make the most of the advantages offered by this security instrument without any concerns that the bill might be used contrary to the agreement.