For most purposes, the rules that apply to bills of exchange are, in general, applicable to promissory notes, but there are 10 most Important difference between them, which may be enumerated as follows:
1. In a bill of exchange, there are three parties: (i) the drawer, i.e. the person who makes the order, (ii) the drawee, i.e., the person to whom it is addressed, and (iii) the payee, i.e. the person in whose favour it is drawn. In a promissory note, on the other hand, there are two parties, the promissor and the payee.
2. A bill contains an order to pay, whereas a promissory note contains a promise to pay.
3. The liability of a drawer of a bill is secondary and conditional; it crystallizes on the acceptor’s failure to honour the bill; the liability of the maker of a promissory note is, on the other hand, primary and absolute.
4. In the case of a promissory note, presentment for payment and notice of dishonour are not required, whereas they are necessary in the case of bills of exchange.
5. The position of the maker of a note differs from the acceptor of a bill in that a note cannot be made conditionally. The reason for this distinction is that the acceptor of a bill is not the originator of the bill; his contract is supplementary, being super-imposed on that of the drawer, while the maker of a note originates the instrument.
Thus, although a bill of exchange cannot be drawn conditionally, it can be accepted conditionally. On the other hand, a promissory note cannot be made conditional.
6. The drawer of a bill of exchange stands in immediate relation with the acceptor, while the maker of a promissory note stands in immediate relation with the payee. Thus, there is an immediate relation established between the maker of a note
and the payee; whereas there is an immediate relation, in case of a bill, only between the drawer of an accepted bill and the acceptor.
7. Bills can be drawn in sets; promissory notes cannot be so drawn.
8. A promissory note cannot be made payable to bearer. A bill of exchange can be so drawn, provided it is not made payable to bearer ‘on demand’. (Sec. 31, Reserve Bank of India Act)
9. Foreign bills must be protested for dishonour, if so required by the law of country of their origin. In the case of a promissory note, this is not essential.
10. The following provisions of the Act relating to bills of exchange do not apply to promissory notes, namely, provisions relating to –
(b) Acceptance supra protest, and
(c) Presentment for acceptance.