Discuss the distingtion among Promissory Notes, Bill of Exchange, and Cheques.

Promissory Notes, Bills of Exchange, and Cheques are all negotiable instruments commonly used in commercial transactions, but they have distinct characteristics and serve different purposes. Here's a discussion highlighting the differences among them:

1. Promissory Notes:

   • Definition: A promissory note is a written promise made by one party (the maker) to pay a certain sum of money to another party (the payee) at a specified future date or on-demand.

   • Parties Involved: In a promissory note, there are two parties: the maker who promises to pay, and the payee who receives the payment.

   • Legal Nature: It is a unilateral instrument, meaning it contains only the promise to pay and does not involve a separate obligation by the payee.

   • Usage: Promissory notes are commonly used in loan transactions, financing arrangements, and credit agreements where one party agrees to lend money to another party in exchange for the promise of repayment.

   • Negotiability: Promissory notes can be negotiated, meaning they can be transferred to a third party, who then becomes the holder in due course and has the right to enforce payment.

2. Bills of Exchange:

   • Definition: A bill of exchange is a written order issued by one party (the drawer) to another party (the drawee) directing the drawee to pay a certain sum of money to a third party (the payee) either immediately or at a specified future date.

   • Parties Involved: In a bill of exchange, there are three parties: the drawer who issues the order, the drawee who is directed to make the payment, and the payee who receives the payment.

   • Legal Nature: It involves an unconditional order to pay, making it a contractual obligation on the part of the drawee to make the payment as per the terms specified in the bill.

   • Usage: Bills of exchange are commonly used in international trade and commercial transactions as a means of facilitating payments between parties located in different countries or jurisdictions.

   • Negotiability: Like promissory notes, bills of exchange are negotiable instruments that can be transferred to third parties, allowing for the assignment of payment rights.

3. Cheques:

   • Definition: A cheque is a written order issued by an account holder (the drawer) to their bank directing the bank to pay a specified sum of money to the bearer or a named payee.

   • Parties Involved: In a cheque, there are two parties: the drawer who issues the cheque, and the payee who receives the payment.

   • Legal Nature: It is an order instrument, meaning it instructs the bank to make a payment from the drawer's account to the payee. The bank's obligation to honor the cheque is contingent upon the availability of funds in the drawer's account.

   • Usage: Cheques are widely used for making payments in commercial and personal transactions, such as salary payments, bill settlements, and business transactions.

   • Negotiability: Cheques are negotiable instruments, but unlike promissory notes and bills of exchange, they are typically payable on demand and do not involve a separate negotiation process. However, they can be endorsed and transferred to third parties.

In summary, while Promissory Notes, Bills of Exchange, and Cheques are all negotiable instruments used in commercial transactions, they differ in terms of their legal nature, parties involved, usage, and negotiability, each serving specific purposes in facilitating financial transactions and payments.