Promissory note and Bill of Exchange are defined under Negotiable Instrument Act 1881 as under:
Promissory note (Section 4)
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 to, or to the order of, a certain person, or to the bearer of the instrument.
Bill of exchange (Section 5)
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.
Following are difference between promissory note and bill of exchange:
Promissory note – Only two parties, maker and the payee.
Bill of exchange – Three parties, drawer, drawee and payee. Drawer is the maker who orders the drawee to pay the bill to a certain person (called payee) or to his order. Drawer and payee may be same person.
Promissory note – Liability of maker is primary and absolute
Bill of exchange – Liability of the drawer is secondary and conditional (if drawee fails to make payment).
Promissory note – unconditional promise by the maker to pay to the payee or his order;
Bill of exchange – unconditional order to the drawee to pay as per directions of drawer.
Promissory note – cannot be drawn payable to bearer
Bill of exchange – can be so drawn payable to bearer.
Promissory note – Acceptance by the maker is not required for presenting for payment.
Bill of exchange – if payable after sight – prior acceptance of drawee or of someone on his behalf is required for presenting for payment.
Promissory note – Notice of dishonour is not required, in case of dishonour.
Bill of exchange – Notice of dishonour is required to be given to drawer and the immediate endorsers.
Given above are the point of main difference between promissory note and bill of exchange