Legal Definitions - first of exchange

The term first of exchange is an archaic legal concept that refers to the primary copy within a set of identical payment instructions, historically known as bills of exchange or drafts. In an era when international communication and mail delivery were unreliable, these payment instructions were often issued in duplicate or triplicate. This practice ensured that if one copy was lost or delayed during transit, another could still reach its intended recipient. The "first of exchange" was typically the initial copy dispatched, and its acceptance and payment would automatically invalidate all other copies in that specific set, preventing multiple claims for the same payment.

• Example 1: 19th-Century International Trade

  Imagine a British tea importer in London, Mr. Thompson, ordering a large shipment of tea from a supplier, Ms. Lee, in Hong Kong in the late 1800s. To pay for the tea, Mr. Thompson issues a bill of exchange instructing his London bank to pay Ms. Lee a specific sum upon presentation of the document. Given the long and perilous sea journey, Mr. Thompson's bank prepares three identical copies of this bill of exchange. The copy explicitly marked "First of Exchange" is sent on the fastest clipper ship. The second and third copies are sent on later ships or different routes as a safeguard. When Ms. Lee receives the "First of Exchange" and presents it to her local bank (which then coordinates with Mr. Thompson's London bank), the payment is processed. Once this first copy is honored, the other two copies, even if they eventually arrive, become legally void and cannot be used to claim payment again.

• Example 2: Colonial Government Procurement

  Consider a scenario in the early 1800s where a British colonial administrator in India needs to pay a local contractor for building a new bridge. The funds for this project are held in a treasury account in London. The administrator issues a payment instruction (a bill of exchange) to the London treasury, directing them to pay the contractor. Recognizing the significant risk of documents being lost during the long voyage between India and Britain, the administrator's office prepares three identical bills. The one designated as the "First of Exchange" is dispatched immediately on a fast merchant vessel. The other two copies follow on subsequent ships. When the contractor's agent in London presents the "First of Exchange" to the treasury and receives payment, the other two copies, even if they arrive later, are automatically cancelled and hold no further legal or monetary value.