Distinguish between the following: Promissory Note and Bill of Exchange.

Promissory Note Promissory note is one of the negotiable instruments recognized under the Negotiable Instruments Act, 1881. A "promissory note" is defined by Section 4 of the Negotiable Instruments Act, 1881 as "an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument". A written, unconditional order by one party (the drawer) to another (the drawee) to pay a certain sum, either immediately (a sight bill) or on a fixed date (a term bill), for payment of goods and/or services received. The drawee accepts the bill by signing it, thus converting it into a post-dated check and a binding contract. It also includes a note promising the payment of any sum of money out of a particular fund which may or may not be available, or upon any condition or contingency which may or may not be performed or happen. Requisites of a promissory note as per the Negotiable Instruments Act, 1881 are the following: (a) the document must contain an unconditional undertaking to pay; (b) the undertaking must be to pay money only; (c) the money to be paid must be certain; (d) it must be payable to or to the order of a certain person or to bearer; (e) the document must be signed by the maker. Bill of Exchange According to Section 2(2), "bill of exchange" means a bill of exchange as defined in the Negotiable Instruments Act, 1881 and includes also a Hundi and any other document entitling or purporting to entitle any person, whether named therein or not, to payment by any other person of, or to draw upon any other person for, any sum of money. The Negotiable Instruments Act, defines a "bill of exchange" as an instrument in writing, containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. Under Section 2(3) of the Indian Stamp Act, 1899 a "bill of exchange payable on demand" includes: (a) an order for the payment of any sum of money by a bill of exchange or promissory note or for the delivery of any bill of exchange or promissory note in satisfaction of any sum of money, or in the payment of any sum of money out of any particular fund which may or may not be available, or upon any condition or contingency which may or may not be performed or happen; (b) an order for the payment of any sum of money weekly, monthly or at any other said period; and (c) a letter of credit, that is to say, any instrument by which one person authorises any other person to give credit to the person in whose favour it is drawn. It may be noted that a bill of exchange payable on demand includes even a letter of credit, as per above definition. Thus, the definition in the Indian Stamp Act includes many instruments which could not be classed as 'bills of exchange' within the definition given by the Negotiable Instruments Act, 1881. Alternate Answer (Distinction) The following are the important points of distinction between a bill of exchange and a promissory note: (a) A promissory note is a two-party instrument, with a maker (debtor) and a payee (creditor). In a bill there are three parties-drawer, drawee and payee, though any two out of the three capacities may be filled by one and the same person. In a bill of exchange, the drawer is the maker who orders the drawee to pay the bill to a person called the payee or to his order. When the drawee accepts the bill he is called the acceptor. (b) A promissory note cannot be made payable to the maker himself, while in a bill of exchange, the drawer and payee may be the same person. (c) A promissory note contains an unconditional promise by the maker to pay to the payee or his order; in a bill of exchange there is an unconditional order to the drawee to pay according to the directions of the drawer. (d) A promissory note is presented for payment without any prior acceptance by the maker. A bill of exchange payable after sight must be accepted by the drawee or someone else on his behalf before it can be presented for payment. (e) The liability of the maker of a promissory note is primary and absolute, but the liability of the drawer of a bill of exchange is secondary and conditional. (f) Foreign bill must be protested for dishonour but no such protest is necessary in the case of a note. (g) When a bill of exchange is dishonoured, due notice of dishonour is to be given by the holder to the drawer and the intermediate endorsee, but no such notice need to be given in the case of a promissory note. (h) A bill can be drawn payable to bearer provided it is not payable on demand. A promissory note cannot be made payable to bearer, even if it is made payable otherwise than on demand.