Difference Wiki

Bill of Exchange vs. Promissory Note: What's the Difference?

Edited by Huma Saeed || By Sumera Saeed || Published on November 27, 2023
A bill of exchange involves three parties and is an order to pay, while a promissory note is a two-party instrument where one party promises to pay another.

Key Differences

A bill of exchange involves three parties: the drawer, the drawee, and the payee. The drawer orders the drawee to pay a third party (the payee). While, a promissory note involves just two parties: the maker (who promises to pay) and the payee.
Sumera Saeed
Nov 27, 2023
A bill of exchange is an order made by one person to another to pay money to a third person. Conversely, promissory note is a promise made by one person to another to pay a certain sum of money.
Sumera Saeed
Nov 27, 2023
In a bill of exchange, the liability is conditional and the drawee is not liable until they accept the bill. On the other hand, in a promissory note, the maker is immediately liable to pay the amount.
Huma Saeed
Nov 27, 2023
A bill of exchange requires acceptance by the drawee or someone on their behalf to become a binding obligation. Whereas, a promissory note does not require any acceptance as it is a promise rather than an order.
Aimie Carlson
Nov 27, 2023
Bills of exchange are commonly used in international trade for buying and selling goods. Promissory notes are often used in financing, such as loans or credit transactions.
Sumera Saeed
Nov 27, 2023
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Comparison Chart

Parties Involved

Three (Drawer, Drawee, Payee)
Two (Maker, Payee)
Sumera Saeed
Nov 27, 2023

Nature

Order to pay
Promise to pay
Sumera Saeed
Nov 27, 2023

Liability

Conditional, upon acceptance
Immediate, on issue
Huma Saeed
Nov 27, 2023

Acceptance Required

Yes, by the drawee
No
Sumera Saeed
Nov 27, 2023

Common Use

International trade
Financing, loans
Aimie Carlson
Nov 27, 2023
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Bill of Exchange and Promissory Note Definitions

Bill of Exchange

A trade document in international commerce for buying and selling goods.
The bill of exchange facilitated the overseas trade deal.
Janet White
Nov 14, 2023

Promissory Note

A written promise to pay a specified amount of money on demand or at a future date.
She signed a promissory note for her car loan.
Sumera Saeed
Nov 14, 2023

Bill of Exchange

A written order from one person to another to pay a specific sum to a third person.
The exporter issued a bill of exchange to the importer for the payment of goods.
Sumera Saeed
Nov 14, 2023

Promissory Note

A simple written promise to pay a certain sum of money to a specified person.
The company issued a promissory note to its investor as a commitment to repay the funds.
Janet White
Nov 14, 2023

Bill of Exchange

A negotiable instrument involving three parties in a payment order.
The company used a bill of exchange for its international transaction.
Sumera Saeed
Nov 14, 2023

Promissory Note

A negotiable instrument containing an unconditional promise of payment.
The promissory note was legally binding and required payment on the specified date.
Sumera Saeed
Nov 14, 2023

Bill of Exchange

A financial document ordering the payment of a specified amount of money.
The bill of exchange was presented for payment on the due date.
Sumera Saeed
Nov 14, 2023

Promissory Note

A financial instrument in which one party promises to pay another a definite sum.
The borrower issued a promissory note to the lender agreeing to repay the loan.
Huma Saeed
Nov 14, 2023

Bill of Exchange

An order by the drawer to the drawee to pay money to the payee.
He signed a bill of exchange directing the bank to pay the supplier.
Harlon Moss
Nov 14, 2023

Promissory Note

An instrument for financial transactions as a form of debt acknowledgment.
To secure the credit, he provided a promissory note to the creditor.
Janet White
Nov 14, 2023

FAQs

What is the purpose of a promissory note?

To provide a written promise to pay a certain sum of money.
Janet White
Nov 27, 2023

What is a bill of exchange?

It's a written order to pay a specific sum, involving three parties.
Sumera Saeed
Nov 27, 2023

How does a promissory note differ from a bill of exchange?

A promissory note is a two-party instrument with a promise to pay, while a bill of exchange orders a third party to pay.
Huma Saeed
Nov 27, 2023

Who are the parties in a bill of exchange?

Drawer, drawee, and payee.
Sumera Saeed
Nov 27, 2023

What happens if the drawee refuses to accept a bill of exchange?

The bill cannot be enforced against the drawee.
Harlon Moss
Nov 27, 2023

Can a promissory note be used for personal loans?

Yes, it's often used in personal and commercial loans.
Janet White
Nov 27, 2023

What is the liability of the drawer in a bill of exchange?

The drawer is secondarily liable if the drawee defaults.
Aimie Carlson
Nov 27, 2023

Can a promissory note be transferred to another party?

Yes, if it's a negotiable instrument.
Sumera Saeed
Nov 27, 2023

Who bears the risk in a bill of exchange?

The drawer and endorsers bear the risk until the drawee accepts.
Sumera Saeed
Nov 27, 2023

Is a bill of exchange used in international trade?

Yes, it's commonly used for international transactions.
Sumera Saeed
Nov 27, 2023

Does a promissory note require acceptance?

No, it's a promise and does not require acceptance.
Harlon Moss
Nov 27, 2023

Are bills of exchange legally binding?

Yes, once accepted, they are legally binding.
Janet White
Nov 27, 2023

Can a bill of exchange be unconditional?

Yes, it's typically an unconditional order.
Janet White
Nov 27, 2023

How is a promissory note settled?

By paying the specified amount to the payee.
Sumera Saeed
Nov 27, 2023

Is a promissory note negotiable?

Yes, if it meets certain criteria, it's negotiable.
Harlon Moss
Nov 27, 2023

Is interest mentioned in a promissory note?

It can be, depending on the terms of the agreement.
Janet White
Nov 27, 2023

What role does a drawee play in a bill of exchange?

The drawee is the party ordered to pay the amount.
Janet White
Nov 27, 2023

How are disputes in a bill of exchange resolved?

Through legal channels, as it's a binding document.
Harlon Moss
Nov 27, 2023

What makes a promissory note valid?

A clear promise to pay, amount, and the payee's name make it valid.
Janet White
Nov 27, 2023

What happens if a promissory note is not paid?

The payee can take legal action to enforce payment.
Harlon Moss
Nov 27, 2023
About Author
Written by
Sumera Saeed
Sumera is an experienced content writer and editor with a niche in comparative analysis. At Diffeence Wiki, she crafts clear and unbiased comparisons to guide readers in making informed decisions. With a dedication to thorough research and quality, Sumera's work stands out in the digital realm. Off the clock, she enjoys reading and exploring diverse cultures.
Edited by
Huma Saeed
Huma is a renowned researcher acclaimed for her innovative work in Difference Wiki. Her dedication has led to key breakthroughs, establishing her prominence in academia. Her contributions continually inspire and guide her field.

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