CA Foundation · Accounting · Bills of Exchange and Promissory Notes
Under the Negotiable Instruments Act, 1881, which one of the following is an essential feature that distinguishes a promissory note from a bill of exchange?
A promissory note contains an unconditional promise by the maker to pay money, whereas a bill of exchange contains an unconditional order by the drawer directing the drawee to pay. Writing, signature and a certain sum are common to both instruments.
- AIt must be in writing and signed by the maker
- BIt contains an unconditional promise by the maker to pay, not an order to payCorrect
- CIt must state a certain sum of money
- DIt must be payable to a certain person or to the bearer
Explanation
A promissory note contains an unconditional promise by the maker to pay, whereas a bill contains an unconditional order by the drawer to the drawee. Writing, signature, a certain sum and a certain payee are features common to both instruments, so they cannot distinguish the two.
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