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September 28, 2013

Difference Between Bill of Exchange and Promissory Note

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Friends, in our last posts we gave you a brief introduction about  Bill of Exchange and Promissory Notes. In this post we shall discuss the differences between them. 

Differences between Bill of Exchange and Promissory Note :

Following are the points of difference between a bill of exchange and a promissory note.
  1. Number of Parties :  
    1. Bill of Exchange : There are three parties in a Bill of Exchange they are, Drawer, Drawee and Payee.
    2. Promissory Note : There are only two parties in case of promissory note, they are Maker and Payee.
  2. Promise and Order : 
    1. Bill of Exchange : Bill of Exchange contains an unconditional order to pay.
    2. Promissory Note : Promissory note contains a conditional promise to pay.
  3. Acceptance :
    • Bill of Exchange : Bill of Exchange requires acceptance by the Drawee
    • Promissory Note : Promissory note does not require any acceptance as debtor himself prepares it.
  4. Nature of Liability :
    • Bill of Exchange : In case of Bill of Exchange the drawer's liability is secondary.
    • Promissory Note : In case of Promissory note the liability of the maker is primary.
  5. Maker's Position :
    • Bill of Exchange : In case of Bill of Exchange maker is a creditor.
    • Promissory Note : In case of promissory note, maker is a debtor.
  6.  Formalities in case of Dishonor :
    • Bill of Exchange : Notice of dishonor is essential in case of Bill of Exchange.
    • Promissory Note : No Notice of dishonor is essential in case of promissory note.

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