Distinguish between a Promissory Note and a Bill of Exchange.

Question

Accepted Answer

A promissory note (Section 4) and a bill of exchange (Section 5) are the two most closely related negotiable instruments, but they differ in several concrete respects:

| Basis | Promissory Note | Bill of Exchange |
|---|---|---|
| Nature of the document | An unconditional promise to pay | An unconditional order to pay |
| Number of parties | Two — maker and payee | Three — drawer, drawee and payee |
| Who is primarily liable | The maker, from the outset | The drawee, but only once they accept the bill (before acceptance, the drawer alone is liable) |
| Acceptance | Never required | Required before the drawee becomes liable |
| Maker/Drawer and Payee being the same person | Never possible | Possible — a drawer can draw a bill payable to their own order |
| Notice of dishonour | Not necessary, since the maker is the original promisor | Necessary — the drawer and any endorsers must be notified, or they may be discharged from liability |

In short, a promissory note is a direct, self-contained promise between two parties, while a bill of exchange is a three-cornered arrangement where one party (the drawer) instructs a second party (the drawee) to pay a third party (the payee) — and that instruction only becomes a binding promise once the drawee formally accepts it.

> [!ANSWER]
> See the comparison table above — the chief differences are: promise vs. order, two vs. three parties, no acceptance needed vs. acceptance needed, and no notice of dishonour needed vs. notice of dishonour needed.

Q.Distinguish between a Promissory Note and a Bill of Exchange.

Concept understanding — Promissory Note and Bill of Exchange

Basis	Promissory Note	Bill of Exchange
Nature of the document	An unconditional promise to pay	An unconditional order to pay
Number of parties	Two — maker and payee	Three — drawer, drawee and payee
Who is primarily liable	The maker, from the outset	The drawee, but only once they accept the bill (before acceptance, the drawer alone is liable)
Acceptance	Never required	Required before the drawee becomes liable
Maker/Drawer and Payee being the same person	Never possible	Possible — a drawer can draw a bill payable to their own order
Notice of dishonour	Not necessary, since the maker is the original promisor	Necessary — the drawer and any endorsers must be notified, or they may be discharged from liability

Q.Distinguish between a Promissory Note and a Bill of Exchange.

🎓Unlock everything free for 14 days

Unlock everything free for 14 days