Difference Between Bill of EXCHANGE & Promissory Note :

1) Parties.

There are three parties to a bill of exchange, namely, the drawer, the drawee and the payee; while in a promissory note there are only two parties – maker and payee.

2) Nature of payment.

In a bill of exchange, there is an unconditional order to pay, while in a promissory note there is an unconditional promise to pay.

3) ACCEPTANCE.

A bill of exchange requires an acceptance of the drawee before it is presented for payment, while a promissory note does not require any acceptance since it is signed by the persons who is liable to pay.

4) Liability.

The liability of the maker of a promissory note is primary and absolute, while the liability of a drawer of bill of exchange is secondary and conditional. It is only when the drawee fails to pay that the drawer would be liable as a surety.

5) Notice of dishonor.

In case of dishonor of bill of exchange either due to non-payment or non-acceptance, notice must be given to all persons liable to pay. But in the case of a promissory note, notice of dishonor to the maker is not necessary.

6) Maker’s position.

The drawer of a bill of exchange stands in immediate relationship with the acceptor and not the payee. While in the case of a promissory note, the maker stands in immediate relationship with the payee.

7) Nature of acceptance.

A promissory note can never be conditional, while a bill of exchange can be accepted conditionally.

8) Copies.

A bill of exchange can be drawn in sets, but a promissory note cannot be drawn in sets.

9) PAYABLE to bearer.

A promissory note cannot be made payable to a bearer, while a bill of exchange can be so drawn provided it is not payable to bearer on demand.

10) Payable to maker.

In a promissory note, the maker cannot pay to himself. While in the case of a bill of exchange, the drawer and the payee may be ONE person.