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Difference-between-Bill-of-Exchange-and-a-Promissory-Note

 

Difference between Bill of Exchange and a Promissory Note

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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.” 
 
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

Bill of Exchange

Promissory Note

Meaning

A bill of exchange contains an order from the creditor to the debtor to pay a specified amount to a person mentioned therein.

A promissory note is an instrument in writing containing an unconditional undertaking, signed by the maker to pay a certain sum of money.

Negotiable Instrument Act

Bill of Exchange defined under section 5 of Negotiable Instrument Act.

Promissory Note defined under section 4 of Negotiable Instrument Act.

Parties

There may be three parties i.e. the drawer, the acceptor and the payee.

There are only two parties i.e. Maker and Payee

Drawn by

It is drawn by the creditor

It is drawn by the debtor

Liability

The liability of a drawer of bill of exchange is secondary and conditional.

The liability of the maker of a promissory note is primary and absolute.

Acceptance

Bill of Exchange requires an acceptance by the drawee.

Promissory Note does not require any acceptance by the drawee.

Copies

A single copy is prepared, except in case of foreign bills. (3 copies are made)

One copy is prepared in all cases.

Notice in case of dishonour

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.

In case of dishonour of promissory note, notice of dishonour to maker is not necessary.

Stamps

Stamping is necessary for a bill of exchange except for “bills payable on demand”.

Stamping is necessary for promissory notes without any exceptions.

Payable to bearer

A bill of exchange can be so drawn provided it is not payable to bearer on demand.

A promissory note cannot be made payable to a bearer.

Payable to maker

In the case of bill of exchange, the drawer and the payee may be one person.

In a promissory note, the maker cannot pay to himself.

 
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