Promissory note : A pro-note can not be drawn payable to the bearer. The promissory note is actually an undertaking from the debtor to pay a certain sum of amount to the creditor or to his order. Sometimes the drawer and payee may be the same person. A bill contains an unconditional order to the drawee to pay according to the instruction of the drawer. There are 2 parties involved in a promissory note; Promisor and the Payee.
Bill of exchange is drawn by the creditor. Promissory note : It requires no acceptance. But no such protest is required in the case of a promissory note. Drawer is the maker who orders the drawee to pay the bill to a certain person called payee or to his order. In this article, we learn about Promissory notes and Bills of Exchange and the conditions which make them different from each other. Foreign bills of exchange must be protested for dishonour when such protest is required to be made by the law of the country where they are drawn; but no such protest is necessary in case of dishonour of a promissory note. The word Negotiable means transferable from one person to another either by delivery or by endorsement and delivery.
Bill of exchange The acceptance of the bill may be conditional with the holders consent. In case of dishonour, there is no need for noting. Promissory note : It is written by the debtor. Types of Bill of Exchange The creditor makes Bill of Exchange. Bills of exchange are similar to checks and promissory notes. Bill of exchange A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date Difference between cheque and Bills of Exchange 1. Bill of Exchange is defined in Section 5 of the Negotiable Instrument Act, 1881.
Bills of exchange generally do not pay interest, making them in essence post-dated checks. But the liability of the drawer of a bill is secondary and conditional. Distinguish between bill of exchange and Promissory Note Promissory note A signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand. The liability of the maker of a promissory note is primary and absolute, while the liability of a drawer of the bill of exchange is secondary and conditional. The liability of the Maker of the Bill of Exchange is Secondary and Conditional upon non-payment by the drawee. In the case of a bill of exchange although the drawer, who is the originator of a bill, has to make an unconditional order to pay but under Section 86 the acceptor may accept the bill conditionally.
Noting of a promissory note is compulsory in case of non-payment. It is only when the drawee fails to pay that the drawer would be liable as a surety. Drawer and Payee Same Person: In case of bill of exchange, the drawer can be the payee. Relationship The maker of the Promissory Note will have a direct relation with the payee. Ordering to pay the money that is due. The bill of exchange is kind of negotiable instruments generally arising out of trade transactions.
Format Difference Table Format Bill of Exchange Promissory Note 1. A promissory note can never be conditional, while a bill of exchange can be accepted conditionally. A bill of exchange requires an acceptance of the drawee before it is presented for payment, while a promissory note does not require any acceptance since it is signed by the persons who are liable to pay. If the funds are to be paid immediately or on demand, the bill of exchange is known as a sight bill; if they are to be paid at a set date in the future, it is known as a term bill. Copies: Only one copy of a foreign promissory note is prepared. On the other hand, a promissory note does not require any kind of acceptance.
If they are issued by individuals, they can be referred to as trade drafts. Bill of Exchange Definition A bill of exchange, also known as a draft, is similar to writing a check or a loan, but it does not require an interest rate. Promissory Note is a written document in which the debtor promises the creditor that the amount due will be paid at a future specified date. For this reason, bills of exchange are sometimes also referred to as. Acceptance The Promissory Note does not require any acceptance from the parties concerned before it is presented for payment. Promissory note — Liability of maker is primary and absolute Bill of exchange — Liability of the drawer is secondary and conditional if drawee fails to make payment. If these bills are issued by a bank, they can be referred to as bank drafts.
Below is a compilation of the major points of difference between bill of exchange and promissory note. A promissory note and a bill of exchange, though similar, are two legal documents used in distinct circumstances. Position of Maker: Here, the drawer stands in immediate relationship with the acceptor and not the payee. A Promissory note cannot be made payable to the maker himself. And the promissory note is issued by the debtor. We can distinguish or difference between bill of exchange and promissory note by the points : 1. A bill of exchange can be drawn in sets, but a promissory note cannot be drawn in sets.
Position of Maker: Here, maker stands in immediate relationship with the payee. A bill of exchange can be drawn in sets, but a promissory note cannot be drawn in sets. In case of dishonour, noting becomes important. The acceptance, however, may be conditional. Bill of exchange — if payable after sight — prior acceptance of drawee or of someone on his behalf is required for presenting for payment.