This article will help you to learn about the difference between a bill of exchange and a promissory note.

Difference between Bill of Exchange and Promissory Note

Bill of Exchange

1. Drawer:

It is drawn by a creditor.

2. Parties:

ADVERTISEMENTS:

There are three parties:

(i) Drawer,

(ii) Drawee and

(iii) Payee.

ADVERTISEMENTS:

3. Acceptance:

A bill of exchange requires acceptance of the drawee before it is presented for the payment.

4. Conditional:

It may be accepted condition­ally by the drawee.

ADVERTISEMENTS:

5. Copies:

Foreign bills are drawn in sets, normally three copies are prepared.

6. Position of Maker:

Here, the drawer stands in immediate relationship with the acceptor and not the payee.

ADVERTISEMENTS:

7. Nature of Liability:

In case of bill of exchange, the liability of drawers is conditional and secondary.

8. Notice of Dishonour:

Notice of dishonour must be given by the holder to the drawer and to all previous endorsers.

ADVERTISEMENTS:

9. Noting and Protesting:

Dishonour of a bill requires ‘noting’ and ‘protesting’.

10. Drawer and Payee Same Person:

In case of bill of exchange, the drawer can be the payee.

Promissory Note

1. Drawer:

ADVERTISEMENTS:

It is drawn/written by a debtor.

2. Parties:

There are two parties: Maker, and Payee.

ADVERTISEMENTS:

3. Acceptance:

In case of promissory note, no acceptance is necessary.

4. Conditional:

It cannot be made conditional by the maker.

5. Copies:

Only one copy of a foreign promissory note is prepared.

ADVERTISEMENTS:

6. Position of Maker:

Here, maker stands in immediate relationship with the payee.

7. Nature of Liability:

In case of promissory note, the liability of maker is absolute and primary.

8. Notice of Dishonour:

Notice of dishonour is not necessary to be given to the maker.

ADVERTISEMENTS:

9. Noting and Protesting:

Dishonour of promissory note requires no ‘noting’ and ‘protesting’.

10. Drawer and Payee Same Person:

In case of promissory note, the maker cannot pay to himself.