Legal Definitions - set of exchange

Definition: A set of exchange is a commercial document that consists of multiple parts, each of which is valid only if the goods have not been delivered against any other part. It is commonly used in international trade to ensure that the seller receives payment before the buyer takes possession of the goods.

For example, a bill of lading may be drawn in duplicate or triplicate, with each part being labeled as "first of exchange," "second of exchange," and so on. When one part has been paid, the other parts become void. This means that the seller can only receive payment once, and the buyer cannot take possession of the goods until payment has been made.

Another example of a set of exchange is a letter of credit, which is a document issued by a bank that guarantees payment to the seller if certain conditions are met. The letter of credit may be drawn in multiple parts, with each part representing a different stage of the transaction.

These examples illustrate the importance of using a set of exchange in international trade to protect both the buyer and the seller. By ensuring that payment is made before the goods are delivered, the seller can avoid the risk of non-payment, while the buyer can be sure that they will receive the goods they have paid for.