Comparison Chart Basis for Comparison
Bill of Exchange
Meaning
Bill of Exchange is an instrument in writing showing the indebtedness of a buyer towards the seller of goods.
Defined in
Section 5 of Negotiable nstrument Act! "##".
%arties Drawn by (iability of Ma)er 'an ma)er and payee be the same person* 'opies
Promissory Note A promissory note is a written promise made by the debtor to pay a certain sum of money to the creditor at a future specified date. Section $ of Negotiable nstrument Act! "##".
&hree parties! i.e. drawer! drawee and &wo parties! i.e. drawer and payee. payee. 'reditor Debtor Secondary and conditional Secondary and conditional +es
No
%romissory Note cannot be drawn in copies. Notice is necessary to be gi,en to all Notice is not necessary to be gi,en to the the parties in,ol,ed. ma)er.
Bill can be drawn in copies.
Dishonor
Content: Sale Vs Agreement Agreement to sell A -'ontract of Sale is a type of contract whereby one party /seller0 either transfers the ownership of goods or agrees to transfer it for money to the other party /buyer0. A contract of sale can be a sale or an agreement to sell. n a contract of sale! when there is an actual sale of goods! it is )nown as Sale sell. &here is a little bit of whereas if there is an intention to sell the goods! it is called an Agreement to sell. confusion! regarding these two terms. 1ere we ha,e presented! the differences between Sale and Agreement to sell for clear understanding.
Content: Sale Vs Agreement Agreement to sell ". 2. 3. $.
'omparison 'hart Definition 4ey Differences 'onclusion
Comparison Chart
Basis for Comparison Meaning Nature &ype of 'ontract &ransfer of ris) &itle 6ight to sell 'onse7uences of subse7uent loss or damage to the goods &ax Suit for breach of contract by the seller 6ight of unpaid seller
Sale hen in a contract of sale! the exchange of goods for money consideration ta)es place immediately! it is )nown as Sale. Absolute Executed 'ontract +es n sale! the title of goods transfers to the buyer with the transfer of goods. Buyer
Agreement to sell hen in a contract of sale the parties to contract agree to exchange the goods for a price at a future specified date is )nown as an Agreement to Sell. 'onditional Executory 'ontract No n an agreement to sell! the title of goods remains with the seller as there is no transfer of goods. Seller
6esponsibility of buyer
6esponsibility of seller
8A& is charged at the time of sale.
No tax is le,ied.
&he buyer can claim damages from the seller and proprietary remedy 1ere the buyer has the right to claim from the party to whom the goods damages only. are sold. 6ight to sue for the price. 6ight to sue for damages.
Definition of Sale A sale is a type of contract in which the seller transfers the ownership of goods to the buyer for a money consideration. 1ere the relationship amidst the seller and buyer is of creditor and debtor. t is the result of an agreement to sell when the conditions are fulfilled and the specified time is o,er. &he following are the essential conditions regarding Sale9 ". 2. 3. $. 5.
&here must be at least two parties: one is the buyer! and other is the seller. &he sub;ect matter of the sale is the goods. %ayment should be made in the countrys legal currency. &he goods should pass from seller to buyer. All the necessary conditions of a ,alid contract should be present li)e free consent! consideration! a lawful ob;ect! capacity of parties! etc.
f the goods are being sold and the property is transferred to the buyer! but the seller is not paid. &hen! the seller can go to the court and file a suit against the buyer for the damages and the price too.
Definition of Agreement to Sell An agreement to sell is also a contract of sale of goods! in which the seller agrees to transfer goods to the buyer for a price at a later date or after the fulfillment of a condition. hen there is a willingness of the both the parties to constitute a sale i.e. the buyer agrees to buy! and the seller is ready to sell the goods for monetary ,alue. n an agreement to sell the performance of the contract is done at a future date! i.e. when the time elapses or when the necessary conditions are satisfied. After the contract is executed! it becomes a ,alid sale. All the necessary conditions re7uired at
the time of sale should exist in the case of an agreement to sell too. f the seller rescinds the contract! then the buyer can claim damages for the breach of contract.
Key Differences Between Sale and Agreement to Sell &he following are the ma;or differences between sale and agreement to sell9 ". hen the ,endor sells goods to the customer for a price! and the transfer of goods from the ,endor to the customer ta)es place at the same time! then it is )nown as Sale. hen the seller agrees to sell the goods to the buyer at a future specified date or after the necessary conditions are fulfilled then it is )nown as Agreement to sell. 2. &he nature of sale is absolute while an agreement to sell is conditional. 3. A Sale is an example of Executed 'ontract whereas the Agreement to Sell is an example of Executory 'ontract. $. 6is) and rewards are transferred with the transfer of goods to the buyer in Sale. . n the case of a sale! the right to sell the goods is in the hands of the buyer. 'on,ersely! in agreement to sell! the seller has the right to sell the goods.
Conclsion ?nder ndian Sale of @oods Act "3! section $ /30 deals with the Sale and Agreement to sell! where it has been clarified that the agreement to sell also come under sale. 1owe,er! there is a distinction between these two terms which we discussed abo,e.
!Che"e# is an instrument which contains an unconditional order! drawn on a ban)er! directing to pay a certain sum of money to the person whose name is specified in the instrument. !Bill of Exchange# is a document contains an unconditional order! directing a person! to pay a certain amount to a specified person. &hese two terms sound the same! which becomes the cause of confusion for many people. 'ome! lets start understanding the difference between 'he7ue and Bill of Exchange.
Content: Che"e Vs Bill of Exchange ". 2. 3. $. 5.
'omparison 'hart Definition 4ey Differences Similarities 'onclusion
Comparison Chart
Basis for Comparison Meaning Defined in
Che"e A document used to ma)e easy payments on demand and can be transferred through hand deli,ery is )nown as che7ue. Section = of &he Negotiable nstrument Act! "##"
8alidity %eriod 3 months %ayable to bearer Always on demand Not Applicable! as it is always payable at the @race Days time of presentment.
Bill of Exchange A written document that shows the indebtedness of the debtor towards the creditor. Section 5 of &he Negotiable nstrument Act! "##" Not Applicable 'annot be made payable on demand as per 6B Act! "3$ 3 days of grace are allowed. Bill of exchange needs to be accepted. Must be stamped. No
Acceptance
A che7ue does not re7uire acceptance.
Stamping 'rossing
No such re7uirement. +es
Drawee Noting or %rotesting
Ban) %erson or Ban) f the che7ue is dishonoured it cannot be noted f a bill of exchange is dishonoured or protested it can be noted or protested.
Definition of Che"e A che7ue is a type of bill of exchange! used for the purpose of ma)ing payment to any person. t is an unconditional order! addressing the drawee to ma)e payment on behalf the drawer! a certain sum of money to the payee. A che7ue is always payable on demand! i.e. the amount is paid to the bearer of the instrument at the time of presentment of the che7ue. t is always in writing and signed by the drawer of the instrument.
&here are three parties in,ol,ed in case of che7ue9 •
•
•
Drawer: &he ma)er or issuer of the che7ue. Drawee: &he ban)! which ma)es payment of the che7ue. Payee: &he person who gets the payment of the che7ue or whose name is mentioned on the che7ue.
t should be noted that the issuer must ha,e an account with the ban). &here is a specified time limit of 3 months! during which the che7ue must be presented for payment. f a person presents the che7ue after the expiry of 3 months! then the che7ue will be dishonored. &he ,arious types of che7ues are9 •
•
Electronic Che"e9 A che7ue in electronic form is )nown as an electronic che7ue. $rncated Che"e9 A che7ue in paper form is )nown as truncated che7ue.
Definition of Bill of Exchange A bill of exchange is a negotiable instrument! contains an unconditional order! directing the drawee to pay a certain sum of money to payee addressed in the instrument. &he bill is made and signed by the drawer and accepted by the drawee. t contains a preCdetermined date on which the payment is to be made to the payee. t can be payable on demand when the bill is discounted with the ban). &he parties to the bill of exchange must be certain.
&here are three parties in,ol,ed in the bill of exchange! they are9 •
•
•
Drawer: &he ma)er of the bill of exchange. Drawee: A person on whom the bill is drawn! i.e.! the person who gi,es acceptance to ma)e payment to the payee. Payee: &he person who gets the payment.
&here are three days of grace allowed to the drawee! to ma)e payment to the payee! when it becomes due. +ou might wonder about the days of grace! lets understand it with an example9 A bill is drawn on 5C"C2"$ in the name of ! to ma)e payment to + after 3 months. &he bill will become due on 5C"C 2"5 while the date of maturity is #C"C2"5 because of 3 days of grace are added to it. &he following are the types of bill of exchange9 • •
nland Bill oreign Bill
•
•
•
•
&ime Bill Demand Bill &rade Bill Accommodation Bill
Key Differences Between Che"e and Bill of Exchange ". An instrument used to ma)e payments! that can be ;ust transferred by hand deli,ery is )nown as the che7ue. An ac)nowledgment prepared by the creditor to show the indebtedness of the debtor who accepts it for payment is )nown as a bill of exchange. 2. A 'he7ue is defined in section = while Bill of Exchange is specified in section 5 of the Negotiable nstrument Act! "##" 3. &he drawer and payee are always different in the case of a che7ue. n general! drawer and payee are the same persons in the case of a bill of exchange. $. &he stamp is not re7uired in che7ue. 'on,ersely! a bill of exchange must be stamped. 5. A che7ue is payable to the bearer on demand. As opposed to the bill of exchange! it cannot be made payable to the bearer on demand. =. &he che7ue can be crossed! but a Bill of Exchange cannot be crossed. >. &here is no days of grace allowed in che7ue! as the amount is paid at the time of presentment of the che7ue. &hree days of grace are allowed in the bill of exchange. #. A che7ue does not need acceptance whereas a bill needs to be accepted by the drawee.
Similarities •
•
•
•
•
&hey are Negotiable nstrument. Addressing the drawee to ma)e payment. Always in writing. Signed by the drawer of the instrument. Express order to pay a certain amount.
Conclsion 'he7ue and Bill of Exchange both are used to ma)e payments easily. 1owe,er! the che7ue itself is a type of bill of exchange! used to discharge the liabilities and so it consists of all the features of a bill of exchange. Not only in business! but indi,iduals! go,ernment agencies! and other institutions also use the che7ue to ma)e payments but the bill of exchange is mostly used in business.
