Promissory Note ,Bill Of Exchange and Cheque

PROMISSORY NOTE: definition by rules:

According to negotiable instruments Act 1881, section 4.A promissory note is 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 or to the order of a certain person, or to the bearer of the instrument. A promissory note is drawn and signed by the debtor, who promises to pay the creditor a certain sum of money. The specimen of promissory note is given below:

Tk 8,000

Dhaka 11003 5th April, 2007

Three months after date i promise to pay Mr. Harun the sum of Takas eight thousand, for value received. Stamp Hasanur Rahman

To Mr. Harun

Sd.

A promissory note may be drawn by more than one person also who may undertake to pay the amount both in their individual capacities as well as jointly. The specimen of a promissory note with joint and several liabilities is given below: Tk . Dhaka..20 On demand we jointly and severally promise to pay to. . ....or order the sum of Takas ............... together with interest on such sum from this date at the rate of percent per annum with . rests, for value received.

Stamp (Signaturee across the stamp)

Addresses..

Essential requirementsThe essential characteristics of a promissory note may be summarized as follows: (1). It must be in writing (2) A promissory note contains a promise to pay. (3) There are two parties involved in a promissory note (i) the maker who signs the note and (ii) the payee. (4) It contains an unconditional promise by the maker to pay. (5) A promissory note cannot be made payable to the maker. (6) A promissory note needs no acceptance. (7) A notice of dishonor for non payment is not necessary in case of promissory note. (8) In case of promissory note, the parties in immediately relation are the maker and the payee. (9) A promissory note is not drawn in sets. (10) In case of promissory note, the liability of the maker is primary and absolute.

BILL OF EXCHANGE: Definition by rules

According to negotiable instruments act 1881 section S, A bill of exchange is 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. That is, a bill of exchange contains an order from the creditor to the debtor to pay a specified amount to a person mentioned therein. The maker of a bill is called the drawer, the person who is directed to pay is called the drawee; the person who is entitled to receive the payment is called the payee; sometimes the drawer himself is the payee. The specimen of a bill of exchange is given below: Tk. 10, 000 Dhaka, 3rd March 2007

Two months after date pay to Mr. Mamun or order the sum of taka Ten thousand only, for value received.

To Mr. Habibur Rashid 201/A, Dhanmondi Dhaka

Accepted Sd/- Habibur Rashid

Stamp Md. Hasanur Rahman

Essential Characteristics
The essential characteristics of a bill of exchange may be summarized as follows: (1) It must be in writing (2) A bill of exchange contains an order to pay. (3) There are usually three parties to the bill (i) the drawer (ii) drawee and (iii) payee. (4) It contains on unconditional order to the drawee to pay. (5) A bill of exchange can be made payable to the drawer. In this case the bill will have only two parties. (6) Acceptance is a must for a bill of exchange. (7) In case of dishonor of bill, a notice must be given to all persons liable to pay. (8) In case of bill of exchange, the parties in immediate relation are the drawer and the acceptor. (9) A bill of exchange is drawn in sets. (10) In case of bill of exchange, the liability of the drawer of the bill is secondary. He is liable to pay only when the acceptor of the bill refuses to pa y

.CHEQUE:

Definition by rules

According to the negotiable instruments act 1881, section 6, a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. It is an important document for any transaction in the business world. Thus, a cheque is a bill of exchange with two distinctive features namely-

1) It is always drawn on a bank 2) It is always payable on demand Features of a Cheque 1) A cheque is printed paper 2) On the printed paper it specifies the bank and branch address 3) It must be in writing 4) A cheque is always drawn on a banker 5) A cheque can only be drawn payable on demand 6) It must have a date

7) Cheque no is also exist 8) It must contain an order to pay 9) It includes an account no of owner of the account holder 10) The order to pay must be unconditional 11) The sun payable must be certain 12) A cheque must contain an order to pay money only
Specimen of a Cheque Dutch-Bangla Bank Limited Uttara Branch, Dhaka Current Account No.

. 1

Date 06/06/2007 Pay to Abdullah Al-Mahmud The sum of TakaTwenty five thousand taka only or bearer

Tk. 25,000/=

SB 3907513 A

DIFFERENCE BETWEEN BILL OF EXCHANGE AND PROMISSORY NOTE

Particulars
1. Definition

Bill of Exchange
A bill of exchange is 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. In a bill of exchange there are three parties the drawer, drawee and payee A bill of exchange is an order for making the payment Bill payable after sight requires acceptance of the drawee before it is

Promissory note
A promissory note is 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 or to the order of a certain person, or to the bearer of the instrument. In a promissory note there are two parties the maker of the note and the payee A promissory note contains a promise to make the payment Promissory note does not require it

2. Number of parties

3. Promise and order

4. Acceptance

5. Nature of liability

presented for payment The liability of drawer of a bill of exchange is secondary and conditional The maker or drawer of an accepted bill stands in immediate relation with the acceptor and not the payee A bill of exchange can be drawn payable to bearer Notice of dishonor must be given by the holder to all prior parties who are liable to pay

The liability of the maker of a promissory note is primary and absolute The maker of promissory note stands in immediate relation with the payee A promissory note cannot be drawn payable to bearer No notice is necessary to the maker

6. Makers position

7. Payable to bearer 8. Formalities in case of dishonor

DIFFERENCE BETWEEN A BILL OF EXCHANGE AND A CHEQUE:

Although a cheque, being a class of a bill of exchange must satisfy almost all the essentials of a bill e.g. signed by the drawer, containing an unconditional order, to pay a certain sum of money, to the order of a person or bearer, etc. Yet, there are few points of difference between the two namely1. A bill of exchange is usually drawn on some person or firm while a cheque is always drawn on a bank.

2. A cheque is generally used for inland payments but a bill of exchange may be used both for inland and foreign payments. 3. Drawer cannot hold the drawee liable on a bill of exchange unless the latter has accepted it. It is essential that a bill of exchange must be accepted before its payment can be claimed. A cheque does not require any such acceptance. 4. A cheque is always payable on demand. A bill of exchange may be payable on demand or on the expiry of a fixed period. 5. A cheque is payable immediately on demand without any days of grace but in the case of a time bill of exchange , three days of grace are allowed from the due date. 6. A bill of exchange must be properly stamped. A cheque does not require any stamp. 7. A bill of exchange must be duly presented for payments or else and the drawer will be completely discharged. In the case of a cheque, drawer is discharged from liability only when the delay in presentment has caused him some loss on account of failure of the bank. 8. Unlike cheque, a bill of exchange cannot be crossed. 9. A cheque drawn payable to bearer on demand shall be valid but a bill payable on demand can never be drawn payable to bearer. 10. Unlike bills of exchange, cheques usually are not intended for circulation but for immediate payment. 11. Unlike cheques, the payment of a bill cannot be cancelled by the drawer.