Distinguish among a cheque, a bill of exchange, and a promissory note.

Cheque, bill of exchange, and promissory note are financial instruments used in commercial and financial transactions, each with distinct characteristics and purposes. Here are the key distinctions among these three instruments:

1. Cheque:

• A cheque is a negotiable instrument used to make payments to a specific payee or bearer.
• It is drawn on a bank or financial institution and is issued by an account holder to transfer funds from their account to the payee.
• A cheque instructs the bank to pay a specified amount of money to the payee mentioned on the cheque or to the bearer (the person holding the cheque) upon presentation.
• Cheques are commonly used for various payments, including bills, salaries, and everyday transactions.
• Cheques are typically open instruments, meaning they are payable to the bearer or a specific payee but can be transferred to others through endorsement.

2. Bill of Exchange:

• A bill of exchange is a written order, signed by the drawer (the person issuing the bill), directing the drawee (the person who owes the money) to pay a specific sum of money to the payee (the person entitled to receive payment) on a specified future date.
• Bills of exchange are commonly used in commercial transactions and international trade as a means of ensuring payment for goods or services.
• They can be either payable on demand (sight) or at a specific future date (time).
• Bills of exchange are typically transferable and can be endorsed to other parties, allowing for flexibility in their use.

3. Promissory Note:

• A promissory note is a written promise made by one party (the maker or issuer) to pay a specific sum of money to another party (the payee) at a predetermined future date or on demand.
• Unlike a bill of exchange, a promissory note does not involve three parties (drawer, drawee, and payee); it only involves the maker and the payee.
• Promissory notes are often used in lending and borrowing arrangements, such as loans and mortgages, where the borrower promises to repay the lender at a specified time.
• Promissory notes can also be transferable, allowing the payee to endorse and transfer the right to receive payment to another party.

In summary, the primary differences among these instruments lie in their form, purpose, and the number of parties involved:

• A cheque is an order to a bank to pay a specified amount of money from the drawer's account to the payee, often used for various types of payments.
• A bill of exchange is a written order from the drawer to the drawee, directing payment to the payee, frequently used in commercial transactions and trade.
• A promissory note is a written promise from the maker to the payee to repay a specific sum of money, often used in lending and borrowing arrangements.