Notice is not necessary to be given to the maker. A Bill of Exchange is a written document which is duly stamped and signed by the drawer carrying an unconditional order which directs not commands a person to pay a specific amount to a particular person or to the order of the particular person or the holder of the instrument.
The following conditions need to be fulfilled:. The creditor makes Bill of Exchange. It is used in business to settle the debt between the parties. A promissory note is a negotiable instrument, containing a written unconditional promise, duly stamped and signed by the drawer, to pay a specified sum of money to a particular person or the order of the particular person. It is made by the debtor to borrow money from the creditor. The features of a promissory note are as under:.
Along with the differences between the bill of exchange and promissory note, there are a few similarities like both the two instruments are not payable to the bearer on demand as per RBI Act, Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Types of Bill of Exchange.
Key Differences Between Bill of Exchange and Promissory Note The following are the major differences between bill of exchange and promissory note: Bill of Exchange is a financial instrument showing the money owed by the buyer towards the seller.
In the case of promissory notes, the liability of its drawer is primary and absolute. In the case of bills of exchange, the liability of its drawer is only secondary and conditional.
Event of Dishonouring. When a drawer dishonours a promissory note, no notice is served to this individual. When a drawer dishonours a bill of exchange, notice is served to every party involved in the relevant transaction. Availability of Copies. These financial instruments do not allow any copies of it. These financial instruments allow copies and do not have any specified limit.
Payable Entity. The same individual as its drawer cannot also be the entity who is a payee for a promissory note. While a bill of exchange can have different entities as its drawer, drawee and payee; it can also have one entity serving as its drawee and payee. While this table above describes fundamental differences between promissory notes and bills of exchange, students should also learn their differences to that of a cheque — another financial instrument.
Subsequently, Vedantu offers detailed study materials on all these topics written by expert teachers to help students in their studies. Additionally, students can also attend live classes offered by Vedantu to clear any doubt they might have. Issuance These are issued by debtors and contain their stamp and signature along with a predetermined date for payment and a fixed amount. Acceptance and Legality These negotiable financial tools need not be accepted by a drawee to be valid and legally binding.
Liability In the case of promissory notes, the liability of its drawer is primary and absolute. Event of Dishonouring When a drawer dishonours a promissory note, no notice is served to this individual. There are three parties to a bill of exchange, namely, the drawer, the drawee and the payee, while in a promissory note there are only two parties: maker and payee. In a bill of exchange, there is an unconditional order to pay, while in a promissory note there is an unconditional promise to pay.
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. 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. It is only when the drawee fails to pay that the drawer would be liable as a surety. In case of dishonor of bill of exchange either due to non-payment or non-acceptance, notice must be given to all persons liable to pay.
But in the case of a promissory note, notice of dishonor to the maker is not necessary. The drawer of a bill of exchange stands in immediate relationship with the acceptor and not the payee. While in the case of a promissory note, the maker stands in immediate relationship with the payee.
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