Difference between the bill of exchange and promissory note

by • 06/01/2013 • GeneralComments (0)469

Q.10 What is the difference between the bill of exchange and promissory note?

Ans:

BILL OF EXCHANGE PROMISSORY NOTE
1. Definition

It is an order, written by the drawer to pay to drawee a specified sum of money at a certain date.

It is a promise, written by the drawer to pay to the the drawee a specified sum of money at a certain date.

 

2. Statement

It is a written order of payment to the acceptor.

It is a written promise of payment by debtor or its debtee.
3. Acceptance

It (except a sight bill) does need an acceptance (for drawing) from its drawee.

It needs no acceptance (for drawing) from drawee.

 

4. Copies:

It (if is inland) needs no further copies but three copies are made if it is foreign.

It needs no further copies.
5. Parties:

Sometimes, instead of drawee another person accepts it; therefore it has four parties viz., drawer, drawee, payee and acceptor.

It has two parties – viz., drawer and payee.

 

6. Drawer

Its drawer can be ordinary debtee or seller.

Its drawer can be ordinary debtor or buyer.
7. Drawee:

Its drawee is the debtor or buyer.

Its drawee is the debtee or seller.
8. Payee

Its drawer can also be the payee.

Its drawer can never be the payee.
9. Holder:

Its holder can be the creditor, or drawer or endorsee.

Its holder can be the debtor, or drawee or endorsee.
10. Responsibility

Its drawee is responsible for the payment.

Its drawer is responsible for the payment.

 

11. Days of grace:

It (except sight bill) has three days of grace.

It has no days of grace.
12. Noting or Protesting

It if dishonoured does need noting. Further in case of a foreign bill, protesting follow noting.

It is free of the need of noting or protesting against its dishonour.

 

13. Use:

It is more in use then as note.

It is less in use than as bill.

 

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