What is the difference between a bill of exchange and Promissory Note?

There are the following points of distinction between a bill of exchange and a promissory note:

1. The first and foremost distinction is that a bill is an unconditional order, whereas a note is an unconditional promise.

2. In a bill, there can be three parties-drawer, drawee and payee. In case of a promissory note there are only two parties-makers and payee.

3. In a bill, the drawer and drawee, or drawee or drawer and payee can be the same person. A promissory note cannot be made payable to the maker himself.

4. A bill payable after sight cannot be presented for payment before it has been accepted. A promissory note is not at all required to be accepted.

5. The position of a drawer in a bill is like that of a surety, as such his liability is secondary and conditional. In a promissory note, the liability of the maker is primary and absolute.

6. A bill can be drawn payable to bearer, whereas a promissory note cannot be drawn payable to bearer. It can only be payable to a certain person or his order.

7. A foreign bill must be protested for dishonour if it is required under the law of the country where it is drawn. In case of a foreign note, there is no need for such a protest.

8. Notice of dishonour of a bill by the holder to the drawer and intermediate indorsers is necessary. In case of a promissory note, no such notice is necessary.

9. The drawer of a bill of exchange stands in an immediate relation with the acceptor. The maker of a promissory note, on the other hand, stands in an immediate relation with the payee, and the indorser with his indorsee. Other signatories may by an agreement, stand in an immediate relation with a holder.

10. Presentment for acceptance is applicable to certain types of bills. A promissory note is not at all required to be accepted.

11. Foreign bills are generally drawn in sets of three. A foreign promissory note is not drawn in sets, only one copy is prepared.

12. A bill can be accepted for honour. A promissory note is not at all required to be accepted.