Difference between Bill of Exchange and a Promissory Note
What is Bill of Exchange & Promissory Note and their difference is as under-
What is Bill of Exchange -
A bill of exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
What is Promissory Note -
A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person.
There is a difference between Bill of Exchange and a Promissory Note, is as under-
Particulars
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Bill of Exchange
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Promissory Note
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Meaning
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A bill of exchange contains an order from the creditor to the debtor to pay a specified amount to a person mentioned therein.
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A promissory note is an instrument in writing containing an unconditional undertaking, signed by the maker to pay a certain sum of money.
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Negotiable Instrument Act
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Bill of Exchange defined under section 5 of Negotiable Instrument Act.
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Promissory Note defined under section 4 of Negotiable Instrument Act.
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Parties
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There may be three parties i.e. the drawer, the acceptor and the payee.
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There are only two parties i.e. Maker and Payee
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Drawn by
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It is drawn by the creditor
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It is drawn by the debtor
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Liability
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The liability of a drawer of bill of exchange is secondary and conditional.
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The liability of the maker of a promissory note is primary and absolute.
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Acceptance
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Bill of Exchange requires an acceptance by the drawee.
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Promissory Note does not require any acceptance by the drawee.
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Copies
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A single copy is prepared, except in case of foreign bills. (3 copies are made)
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One copy is prepared in all cases.
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Notice in case of dishonour
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In case of dishonour of bill of exchange either due to non-payment or non-payment or non-acceptance, notice must be given to all person liable to pay.
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In case of dishonour of promissory note, notice of dishonour to maker is not necessary.
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Stamps
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Stamping is necessary for a bill of exchange except for “bills payable on demand”.
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Stamping is necessary for promissory notes without any exceptions.
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Payable to bearer
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A bill of exchange can be so drawn provided it is not payable to bearer on demand.
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A promissory note cannot be made payable to a bearer.
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Payable to maker
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In the case of bill of exchange, the drawer and the payee may be one person.
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In a promissory note, the maker cannot pay to himself.
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