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:
There are three parties:
(i) Drawer,
(ii) Drawee and
(iii) Payee.
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.
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.
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.
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:
It is drawn/written by a debtor.
2. Parties:
There are two parties: Maker, and Payee.
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.
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.
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.