Bills of Exchange and Promissory Note are financial instruments used in credit transactions, but they differ in structure and purpose. A Bill of Exchange is a written order from one party (drawer) directing another party (drawee) to pay a specified sum to a third party (payee) at a future date, commonly used in trade transactions. A Promissory Note, on the other hand, is a written promise by one party (maker) to pay a specified sum directly to another party (payee) at a future date, typically used for borrowing money.

What is a Bill of Exchange?

A bill of exchange is a written, unconditional order by one party (the drawer) directed to another party (the drawee) to pay a certain sum of money to a third party (the payee) on demand or at a fixed or determinable future date. Bills of exchange are frequently used in international trade to finalize transactions involving goods and services.

Examples of Bills of Exchange:

1. An exporter requiring payment from an overseas buyer might issue a bill of exchange that the buyer accepts and is then responsible for payment at its maturity.
2. A wholesaler issues a bill to retailers for goods delivered on credit, payable within 30 days.

What is a Promissory Note?

A promissory note is a financial instrument that contains a written promise by one party (the issuer or maker) to pay another party (the payee) a definite sum of money, either on demand or at a specified future date. Promissory notes are generally simpler and do not require acceptance by the payee since they are issued directly by the borrower to the lender.

Examples of Promissory Notes:

1. A loan taken out from a bank where the borrower issues a note promising to repay the amount with interest by a certain date.
2. A small business owner borrows money from a friend and issues a promissory note for repayment with an agreed-upon interest rate.

Difference Between Bills of Exchange and Promissory Notes:

Basis	Bill of Exchange	Promissory Note
Definition	A written order from one party to another to pay a third party a specific sum either on demand or at a future date.	A written promise made by one party to pay another party a specified sum on demand or at a future date.
Parties Involved	Drawer, Drawee, and Payee.	Maker and Payee.
Acceptance Required	Yes, by the drawee.	No, not applicable as it is a promise, not an order.
Type of Instrument	An order to pay.	A promise to pay.
Usage	Common in international trade.	Commonly used in finance and personal loans.
Liability	Conditional upon acceptance.	Unconditional promise to pay.
Regulation	Subject to specific laws governing bills of exchange.	Governed by laws pertaining to negotiable instruments.
Examples	A trader ordering a buyer to pay a supplier.	A car loan where the buyer promises to repay the bank.