Distinction Between Promissory Note and Bill of Exchange

Disitncton Beween Promissory Noe And Bill Of Exchange E xchange Q. Dene a promissory noe and ii of exchange drawing a distncton ewee wo. !"###$!"##"$!"##%$!"##&'A$ (. )nrod*cton+ Promissory note and bill of exchange are negoable instruments. the negoable instrument recognizes only three instrument viz., a promissory note, bill of exchange and a cheque. the essenals of the both the instruments are to great extent are same. somemes a bill of exchange is called a dra.

". Deniton of promissory noe+ According to Sec  of the negoable instrument act !A promissory note is an instrument in "ring #not being a ban$ note or currency note% containing an uncondional underta$ing, signed by the ma$er to pay on demand or at a &xed or determinable future me a certain sum of  money only to or to the order of a certain person or to the bearer of the instrument.

,. Essentals of a promissory noe+ 'ollo"ing are the essenals of a promissory note.

!i$ -rien+ Promissory note must be in "ri(en form. a verbal promise to pay does not become a promissory note.

!ii$ ) m*s conain promise o pay+ )here must be a promise or an underta$ing to pay. a mere ac$no"ledgment of debt is not a promissory note.

!iii$ /nconditonal promise+ *t must contain an uncondional promise to pay. pay. the promise to pay must not depend upon the happening of some uncertain event or condion.

!i0$ 1igna*re of ma2er+ )he ma$er must singed the promissory note.

!0$ 3a2er m*s e a cerain person+ )he promissory note must indicate "ho is the person ta$ing responsibility to pay the amount.

!0i$ 4he payee m*s e cerain+

)he payee of promissory note must also a certain person.

!0ii$ 4he s*m payale p ayale m*s also e cerain )he sum payable must also be certain and de&nite.

!0iii$ 4he s*m payale m*s e in Pa2isani c*rrency+ )he sum of money payable must be in Pa$istani Pa$istani currency a promissory note containing a promise to pay a certain amount in foreign currency is not a valid promissory note.

!ix$ Oher legal formalites+ #i% +onsideraon must be la"ful. #ii% *t should be dated. #iii% *t must be properly stamped. #iv% Place should be menoned "here it is made. #v% *t is also necessary to cross all stamps axed on the note.

%. Bill of exchange+ ). Deniton+ According to Sec. -. !A bill of exchange is an instrument in "ring containing an uncondional order, order, singed by the ma$er, ma$er, direcng a certain ce rtain person to pay on demand or at a &xed or determinable future me a certain sum of money only to or the order for a certain person or the bearer of the instrument.!

)). Explanaton+ )he person "ho ma$es the bill is called dra"er. dra"er. the person "ho is directed to pay is the dra"ee. the person to "hom the payment is to be made is called payee.

))). Essentals+ !i$ -rien+ )he bill of exchange must be in "ring. it may be "ri(en in any language.

!ii$ /nconditonal order+ )he order contained in the bill of exchange must be uncondional.

!iii$ 1igned y he drawer+ ill of exchange must be signed by the dra"er.

!i0$ 4he drawee m*s e a cerain person+ )he dra"ee of a bill of exchange must be a certain person. his name should be menoned in it.

!0$ 4he payee m*s e cerain+ )he payee of the bill also be a certain person.

!0i$ 4he s*m payale m*s e cerain+ )he sum payable must be certain and de&nite.

!0ii$ Pa2isani c*rrency+ )he sum payable must be Pa$istani currency.

!0iii$ Oher legal formalites+ #i% *t should be dated. #ii% /ame of place "here it is dra"n. #iii% *t should be a(ested. #iv% *t should be properly stamped.

5. Distncton eween promissory noe and a ill of exchange+ ). N*mer of partes+ *n promissory note there are t"o pares. *n a bill of exchange there are three pares.

)). Promise and order+ *n an promissory note there is a promise to pay. *n an bill of exchange there is an order to pay.

))). Na*re of liailiy+ 0iability of the ma$er of promissory note is primary. primary. 0iability of the ma$er of a bill of exchange is secondary in nature.

)6. Positon of ma2e+ )he ma$er of a promissory note stands in an immediate relaon "ith the payee. *n bill of exchange, the dra"n of bill stands in an immediate relaon "ith the dra"ee and the dra"ee "ith payee.

6. As o liailiy of drawer+ )he ma$er of a promissory note is a debtor. )he dra"er of bill of exchange is the creditor.

6). Payale o earer+ A promissory note can not be dra"n payable to bearer. A bill of exchange can be dra"n payable to bearer.

6)). As o accepance+ A promissory note needs no acc eptance. A bill of exchange needs acceptance by the dra"ee.

6))). Payale o ma2er+ A promissory note cannot made payable to ma$er himself. A bill of exchange can be ma$e payable to the ma$er himself. himself.

)7. As o notce of dishono*r+ *n case of dischonour of promissory note there is no need to give a noce of dischonour to the ma$er. *n case of dishonour of a bill of exchange there is a need to give noce to all the pares of bill.

7. As o proes+ A promissory note need not to be protested. A foreign bill of exchange must be protested for dishonour.

7). As o copies+ A promissory not can not be dra"n in sets. Abill of exchange can be dra"n in sets.

8. 9oncl*sion+ A promissory note and bill of exchange are t"o di1erent types of negoable instrument. in a bill of exchange the dra"er does not ma$e a promise to pay the money himself but orders a third person to ma$e the payment. in a promissory note there is a promise to pay the money.