Is a holder's presentment valid before the maturity date of an acceptance draft?

Compiled from: Shouguang City People's Court

Case Review

On November 23, 2021, Company C, as the drawer and acceptor, issued an electronic commercial acceptance bill to the payee, Company D, with a face amount of 1.01 million yuan and a maturity date of November 23, 2022. The bill was subsequently endorsed and transferred in sequence to Companies E, B, and A. On November 15, 2022, Company A presented the bill for payment to Company C through the bill trading management platform. Company C failed to fulfill its payment obligation to Company A. The platform processing result displayed “transaction in process,” the transaction status displayed “pending response,” and the bill status displayed “presentment for payment pending acceptance.”

On April 24, 2023, Company A filed a lawsuit against Companies B, C, D, and E with Shouguang Court, requesting an order requiring the four companies to pay Company A the bill amount of 1.01 million yuan plus interest.

The Shouguang Court held after trial that Company A, having acquired the electronic commercial acceptance bill at issue based on its sales contract with Company B, was the lawful holder of the said electronic commercial acceptance bill and enjoyed the rights thereon.

Ultimately, the Shouguang Court ruled that Companies B, C, D, and E shall, within ten days from the effective date of the judgment, jointly and severally pay to Company A the face value of the electronic commercial acceptance bill in the amount of 1.01 million yuan, together with interest (calculated on the basis of 1.01 million yuan, from November 23, 2022, until the date of full repayment, at the one-year loan prime rate published by the National Interbank Funding Center in November 2022).

Negotiable Instruments Law of the People's Republic of China

Article 19

A bill of exchange is a negotiable instrument issued by the drawer, entrusting the payer to pay unconditionally a determined amount to the payee or holder at sight or on a specified date. Bills of exchange are divided into bank bills and commercial bills.

Article 53

A holder shall present the bill for payment within the following time limits:

(1) For a bill payable at sight, presentment for payment shall be made to the drawee within one month from the date of issue;

(2) For a bill of exchange payable on a fixed date, at a fixed period after issue, or at a fixed period after sight, the holder shall present it for payment to the acceptor within ten days from the date of maturity.

If the holder fails to present the bill for payment within the time limit prescribed in the preceding paragraph, the acceptor or drawee shall still be liable to pay the holder after the holder provides an explanation.

Presentment for payment to the drawee through a collecting bank or through the bill exchange system shall be deemed as presentment for payment by the holder.

Article 68

The drawer, endorser, acceptor, and guarantor of a bill of exchange shall be jointly and severally liable to the holder. The holder may exercise the right of recourse against any one, several, or all of the persons liable on the bill, without regard to the order of their liability.

Article 70

When exercising the right of recourse, the holder may demand the person against whom recourse is sought to pay the following amounts and expenses:

(1) The amount of the bill of exchange that was refused payment;

(2) interest on the amount of the bill of exchange calculated at the rate prescribed by the People's Bank of China from the date of maturity or the date of presentment for payment to the date of settlement;

(3) Expenses incurred in obtaining the relevant certificate of dishonor and in issuing notices.

When the person against whom recourse is sought settles the debt, the holder shall deliver the draft and the relevant certificate of dishonor, and issue a receipt for the interest and expenses received.

"Measures for the Administration of Electronic Commercial Draft Business"

Article 59

If the holder presents the draft for payment before its maturity date, the acceptor may pay or refuse to pay, or pay on the maturity date. If the acceptor refuses to pay or fails to respond, the holder may present the draft for payment again after the maturity date.

[4] Author's Opinion

With the widespread use of electronic commercial drafts, drafts with consecutive endorsements have become increasingly common, and it is not unusual for holders of electronic commercial drafts to present them for payment before maturity. Does such presentment for payment before maturity truly have legal effect?

In this case, the holder presented the electronic commercial acceptance bill for payment through the electronic commercial acceptance bill system before the bill matured. The system displayed "presentment for payment pending acceptance," and this presentment status remained displayed until after the bill matured (persisting throughout the entire presentment period). The acceptor continuously failed to respond or take any action throughout the entire presentment period, which should be deemed a refusal to pay upon expiration of the presentment period. At this point, the holder's expression of intent to present for payment "before the bill matured" has the same legal effect as its expression of intent to present for payment "within the presentment period," and it may exercise the right of recourse against the drawer, endorsers, and acceptor of the electronic commercial acceptance bill. In order to promote an honest and trustworthy business environment, maintain stable transaction order, and reduce social transaction costs, the court supports the holder's claims in accordance with the law.

The legislative purpose of the Negotiable Instruments Law of the People's Republic of China is to regulate negotiable instrument activities and protect the lawful rights and interests of the parties involved in such activities. The provision requiring presentment for payment "within ten days from the date of maturity of the instrument" is intended to urge the holder to exercise the rights under the instrument in a timely manner, and it should not be used as a basis to deprive the holder of the right of recourse against prior parties. A holder's presentment for payment before the maturity date of the instrument produces the same legal effect as presentment for payment within the prescribed presentment period. This accords with the legislative intent of the Negotiable Instruments Law of the People's Republic of China and also complies with the requirements of the principle of fairness under the Civil Code of the People's Republic of China. It is of great significance for maintaining order in the negotiable instruments market and promoting the high-quality development of the socialist market economy.