A bill of exchange is an internationally important payment means, and the maturity of such a bill is a main element that must be clearly understood. Accordingly, NPLaw respectfully presents to you the below legal article providing useful information related to the maturity of bills of exchange payable on demand.

I. Understanding the maturity of a bill of exchange payable on demand

A bill of exchange is a negotiable instrument and constitutes an unconditional payment undertaking, meaning that the purchaser is obliged to pay the amount stated on the bill without being entitled to give any reason for refusal. The maturity is the time when the drawee (the purchaser) is obligated to pay the amount stated on the bill to the beneficiary (the seller).

Factors affecting the maturity may include:

  • Agreement between the purchaser and the seller: The maturity is usually agreed upon in the contract for the sale of goods.
  • International commercial practices: Certain industries or regions may have specific customs regarding payment terms.
  • Banking regulations: Banks involved in the payment process may have their own regulations regarding the time for paying bills of exchange.

II. Legal provisions on the maturity of bills of exchange payable on demand

1. How is the maturity of a bill of exchange payable on demand determined?

Pursuant to Clause 1, Article 42 of the Law on Negotiable Instruments 2005, the maturity of a bill of exchange payable on demand shall be specified in one of the following forms:

  • Payable upon presentation;
  • Payable after a specified period from the date the bill of exchange is accepted;
  • Payable after a specified period from the date of issuance;
  • Payable on a fixed and specified date.

Accordingly, the maturity of a bill of exchange payable on demand shall be determined in accordance with the above provisions.

2. Legal provisions on the presentation of the bill of exchange payable on demand

Pursuant to Article 43 of the Law on Negotiable Instruments 2005, the legal provisions on the presentation of the bill of exchange for payment include regulations on the time and the conditions for valid presentation, specifically as follows:

  • Time of presentation:
  • On the date the bill of exchange payable on demand falls due or within the subsequent five working days, or after the expiry of the period stated on the bill of exchange if the delay in presentation is caused by a force majeure or an objective impediment.
  • A bill of exchange stating the maturity as ‘payable upon presentation’ must be presented for payment within ninety (90) days from the date of issuance.
  • Conditions for a valid presentation for payment:
    + The bill is presented by the beneficiary or the lawful representative of the beneficiary;
    + The bill of exchange payable on demand has fallen due;
    + The presentation is made at the payment location as prescribed.
  • Form of presentation: Direct presentation or presentation by registered mail through the public postal network.

3. When is the payment of the bill of exchange payable on demand deemed completed?

Pursuant to Article 46 of the Law on Negotiable Instruments 2005, payment of the bill of exchange payable on demand shall be deemed completed in the following cases:

  • The drawer, the drawee, or the acceptor has paid in full the amount stated on the bill of exchange to the beneficiary;
  • The acceptor becomes the beneficiary of the bill of exchange payable on demand on or after the maturity date;
  • The beneficiary cancels the bill of exchange or waives the rights thereto, provided that such cancellation or waiver is clearly stated in the bill of exchange by the words ‘cancellation’, ‘waiver’, or other words of similar meaning, together with the date of cancellation or waiver and the signature of the beneficiary.

Accordingly, the payment of the bill of exchange is deemed completed when it falls within one of the cases listed in Article 46 of the Law on Negotiable Instruments.

III. Questions regarding the maturity of bills of exchange payable on demand

1. If the bill of exchange is refused payment in whole or in part, what should the beneficiary do?

Pursuant to Clause 1, Article 48 of the Law on Negotiable Instruments 2005: The beneficiary has the right to recourse for the amount specified in Article 52 of this Law against the following persons:

  • The drawer, the guarantor, and prior endorsers, in the case that the bill of exchange payable on demand is refused acceptance in whole or in part in accordance with this Law.

Accordingly, if the bill of exchange is refused payment in whole or in part, the beneficiary may exercise the right of recourse in accordance with the law.

2. The issuer of the bill of exchange payable on demand reaches maturity but lacks sufficient funds to pay the beneficiary. What can the beneficiary do to protect their rights?

Based on Clause 1, Article 48 of the Law on Negotiable Instruments 2005: The beneficiary is entitled to recourse for the amount regulated in Article 52 of this Law against the following persons:

  • The drawer, the endorser, or the guarantor, if the bill of exchange payable on demand has fallen due but has not been paid in accordance with its terms. 

Accordingly, when the issuer of the bill of exchange payable on demand reaches maturity but is unable to make payment, the beneficiary may initiate recourse. 

3. The bill of exchange payable on demand reaches maturity, but the beneficiary forgets to request payment. After a long period (for example, two years), does the beneficiary still have the right to claim payment?

Pursuant to Point b, Clause 1, Article 18 of the Law on Negotiable Instruments 2005, the presentation of the bill of exchange payable on demand for acceptance must comply with the following: 

  • The bill of exchange payable on demand stating the maturity in accordance with Point b, Clause 1, Article 42 of this Law must be presented for acceptance within one year from the date of issuance.

Accordingly, the maximum period for making the payment request after the maturity of the bill is one year, except in cases of force majeure.

Therefore, forgetting to request payment does not constitute force majeure, and after a long period (for example, two years), the beneficiary no longer has the right to claim payment.

4. If the bill of exchange payable on demand reaches maturity but an intermediary bank processes the payment slowly, resulting in delayed receipt by the beneficiary, who takes responsibility for such matters?

An intermediary bank handling the payment of the bill of exchange (also referred to as the drawee) is the party responsible for making payment in accordance with Clause 6, Article 4 of the Law on Negotiable Instruments 2005, as follows: 

  • The drawee is the person responsible for paying the amount stated on the bill of exchange or cheque in accordance with the request of the drawer.

In addition, according to Clause 1, Article 357 of the Civil Code 2015:

  • If the obligor delays payment, the obligor must pay interest on the delayed amount corresponding to the period of delay.

Accordingly, if the bill of exchange payable on demand reaches maturity but the intermediary bank delays processing, causing the beneficiary not to receive payment on time, such intermediary bank shall take responsibility.

5. The bill of exchange states the payment date as “the 30th of the month,” but that month has only 28 days (in case of February). How is the lawful payment date determined?

In cases where the maturity is specified as “the 30th of the month”, it may be understood that the parties intended to designate the last day of the month as the payment date.

In practice, current law does not specifically regulate such cases. However, the beneficiary has the right to request early payment or to submit a payment request after maturity, provided that such request is made within one year from the expiry date.

Accordingly, from February 28th to March 2nd, the beneficiary’s request for payment is considered lawful.

6. The issuer wishes to pay the bill before maturity. Does the beneficiary have the right to refuse early payment?

In principle, early payment depends on the agreement between the beneficiary and the drawer or the drawee. Pursuant to Article 47 of the Law on Negotiable Instruments 2005:

  • The drawee who pays the bill of exchange payable on demand prior to its maturity at the request of the beneficiary shall take all damages arising from such early payment.

Accordingly, in practice, early payment does occur and remains subject to the opinions and requests of the beneficiary, as it affects the drawee’s liability for damages.

Therefore, early payment may still be refused by the beneficiary.

IV. Legal advisory services related to the maturity of bills of exchange payable on demand

Understanding our clients’ need to learn about regulations on the maturity of bills of exchange payable on demand, Ngoc Phu Law Company Limited provides support and legal consultation on matters relating to the maturity of bills of exchange payable on demand. Readers may contact NPLaw to receive prompt and dedicated advice from experienced lawyers specializing in legal consultancy and procedures at NPLaw, via the contact information below: