Bills in Sets (Sections 132 and 133)

When foreign bills travelled by sea, a single piece of paper could easily be lost, delayed or destroyed. Merchants therefore drew bills in sets of two or three identical parts, sent by different ships or routes, so that at least one would arrive. The parts are copies of a single obligation: paying one discharges them all. Sections 132 and 133 set out the rules, including what happens when different parts are negotiated to different people.

1. What a Set Is (Section 132)

• Parts: each part is numbered ("First of Exchange", "Second of Exchange", "Third of Exchange").
• Cross-reference: each part must state that it is payable only so long as the others remain unpaid, for example "Pay this First of Exchange, Second and Third of the same tenor and date being unpaid".
• One bill: the set is a single bill. It is extinguished when one part, if it were a separate bill, would be extinguished, for example by payment in due course of any one part.
• Only bills: the Act provides for sets of bills of exchange; promissory notes and cheques are not drawn in sets.

2. Acceptance and Payment of a Set

• Accept one part only: the drawee should accept only one part. If he accepts more than one and they reach different holders in due course, he may be liable on each (Exception to Section 132).
• Pay against the accepted part: the acceptor should pay only against the part bearing his acceptance and take it up; otherwise he risks having to pay a holder in due course of that part as well.
• Presentment for acceptance: the holder may present any part for acceptance, and parts are often sent ahead for acceptance while others are held for negotiation.

3. Parts Negotiated to Different Persons

Liability of the person who splits the set

Under the Exception to Section 132, a person who accepts or indorses different parts in favour of different persons is liable on each part as if it were a separate bill, and so are those who indorse each part after him. The loss falls on the person who created the duplication, and on those who took the parts from him and passed them on.

Priority between holders (Section 133)

If different parts of one set end up with different holders in due course, the one who first acquired title to his part is entitled to the other parts and to the money. The others are left to their remedies against the person who negotiated the parts separately, under the Exception to Section 132.

4. Illustration

A in Mumbai draws a bill in a set of three on B in London, payable to C. C indorses the first part to D on 1 March and, fraudulently, the second part to E on 5 March. Both D and E take for value and without notice. B accepts and pays E on the second part. As between D and E, D acquired title first and is entitled to the money (Section 133). C, who indorsed different parts to different persons, is liable to E on the second part as a separate bill (Exception to Section 132). Had B accepted the first part, he should have paid only against it; by paying E on another part, he would remain exposed to D on the accepted part.

5. Bills in Sets Today

Electronic communication and courier services have made sets far less common, but they survive in documentary trade, where bills of exchange accompany shipping documents. Bills of lading are also commonly issued in sets of originals, on the same principle that delivery against one original accomplishes the others. Section 132 remains relevant to export and import finance and is a frequent examination topic.

6. Related Topics and Provisions

• Bill of exchange (Topic 7)
• Lost instruments and duplicates (Topic 15)