QS Study

A promissory note is a financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date. A bill of exchange is an order to pay. A promissory note is a promise to pay. The fundamental difference between Bill of Exchange and Promissory Note is that the former carries an order to pay money while the latter contains a promise to pay money.

We can distinguish or a difference between the bill of exchange and promissory note by the points:

(1) Number of Parties:

  • Bill of exchange: There are three parties in the bill of exchange.
  • Promissory note: There are two parties in the promissory note.

(2) Number Written By:

  • Bill of exchange: It is written by the creditor.
  • Promissory note: It is written by the debtor.

(3) Order and Promise:

  • Bill of exchange: In a bill of exchange it is an order.
  • Promissory note: In a pro-note, it is a promise to make the payment.

(4) Acceptance of exchange:

  • Bill of exchange: It must be accepted by the drawee before.
  • Promissory note: It requires no acceptance.

(5) Dishonor Notice:

  • Bill of exchange: In this case, notice of dishonor must be given by the holder to the concerned parties.
  • Promissory note: In case of promissory note there is no need to serve the notice to the maker.

(6) Protest:

  • Bill of exchange: A foreign bill must be protested in case of dishonor
  • Promissory note: Protect is not needed in case of pro-note.

(7) In Sets:

  • Bill of exchange: A foreign bill can be drawn in sets.
  • Promissory note: A pro-note cannot be drawn in sets.

(8) Payable to Bearers:

  • Bill of exchange: A bill can be drawn if it is not drawn payable to bearer on demand,
  • Promissory note: A pro-note cannot be drawn payable to the bearer.

(9) Drawer and Payee:

  • Bill of exchange: In this case drawer or payee may be the same person.
  • Promissory note: In case of pro-note the drawer cannot become the payee.

(10) Drawer’s Position:

  • Bill of exchange: In this case, the drawer of accepted bill stands in immediate relation with the acceptor and not the payee.
  • Promissory note: The drawer of the pro-note stands immediate relations with the payee.

(11) Conditional:

  • Bill of exchange: The acceptance of the bill may be conditional with the holder’s consent.
  • Promissory note: A pro-note cannot be made conditional.

(12) Presentment:

  • Bill of exchange: In this case provision relating to presentment for acceptance is applicable.
  • Promissory note: Such provision is not applicable in case of promissory note.
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