(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.
(11) Protest.
Foreign bills must be protested for
dishonor when such protest is required by the law of the place where
they are drawn. But no such protest is required in the case of a
promissory note.