The Differences between bill of Exchange and Promissory note is given here. It is very common to confuse a bill of exchange and a promissory note, especially if we do not fully know their concepts. To understand what differentiates them, read on.
Bill of exchange
The bill of exchange is a full formal value credit instrument that contains an unconditional and abstract order to make its issuer or his order pay a sum of money at maturity in a given place, binding all those involved in it.
It owes its origin to the end of the Middle Ages when the need for monetary trade was born.
It is an order written by a person known as a drawer to another known as drawee to pay a certain amount of money in a certain or determinable future time to a third party, who will be in charge of receiving the benefit.
It has an order to pay a sum to third parties in national currency or in any currency admitted in the quotation. The sum is expressed in numbers and in words. If it is necessary to pay in foreign currency, the equivalent between both currencies must be indicated on the payment day.
It is an accounting document that contains the unconditional promise of a person known as the underwriter to pay a second person called the beneficiary or holder a certain amount of money within a certain period of time.
It owes its name to the statement of obligations: “I owe and I will.”
Being a formal payment instrument, it has certain validity requirements to the person due:
- Mention of being a promissory note: The document indicates somewhere that it is a promissory note.
- The unconditional promise of payment: Offers the unconditional promise to pay a sum of money and its respective interests in national currency or its international equivalent
- Without conditions: Payment is made without requesting any type of condition from the beneficiary.
- Name of the beneficiary.
- Due date.
- Date and place in which it is subscribed.
- Subscriber signature.
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Differences between bill of Exchange and Promissory note
- The letter is signed by a person to request a payment from another in order for it to be delivered to a third party in a specific place.
- The promissory note is issued by the person who takes out a loan.