Difference between Cheque and Bills of Exchange

Negotiable Instruments Act' 1881 Notes
Business Laws Notes B.Com 1st & 2nd Sem CBCS Pattern 

Meaning of Cheque

Cheque is a very common form of negotiable instrument. If you have a savings bank account or current account in a bank, you can issue a cheque in your own name or in favor of others, thereby directing the bank to pay the specified amount to the person named in the cheque. A cheque is an instrument drawn on a specified banker and not expressed to be payable otherwise than on demand Therefore, a cheque may be regarded as a bill of exchange; the only difference is that the bank is always the drawee in case of a cheque.

The maker of a cheque is called the ‘drawer’, and the person directed to pay is the ‘drawee’. The person named in the instrument, to whom or to whose order the money is, by the instrument directed, to be paid, is called the ‘payee’

The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.

From the above definition it appears that a cheque is an instrument in writing, containing an unconditional order, signed by the maker, directing a specified banker to pay, on demand, a certain sum of money only to, to the order of, a certain person or to the bearer of the instrument. Actually, a cheque is an order by the account holder of the bank directing his banker to pay on demand, the specified amount, to or to the order of the person named therein or to the bearer.

Meaning of Bills of Exchange

A bill of exchange or “draft” is a written order by the drawer to the drawee to pay money to the payee. It is an unconditional order issued by a person or business which directs the recipient to pay a fixed sum of money to a third party at a future date. The future date may be either fixed or negotiable. A bill of exchange must be in writing and signed and dated. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date.

Also Read:

As per Section 5 a “bill of exchange” is “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.”

Difference between cheque and bills of exchange:

Basis

Cheque

Bills of Exchange

Drawee

A cheque is always drawn on a bank or banker.

A bill of exchange can be drawn on any person including a banker.

Acceptance

A cheque does not require any acceptance.

A bill must be accepted before the Drawee can be made liable upon it.

Payment

A cheque is payable immediately on demand without any days of grace.

A bill of exchange is normally entitled to three days of grace unless it is payable on demand.

Stamp

A cheque does not require any stamp.

A bill of exchange must be stamped.

Protection

A banker is given statutory protection with regard to payment of cheques in certain circumstances.

No such protection is available to the Drawee or acceptor of a bill of exchange.

Crossing

A cheque may be crossed.

Bill can never be crossed.

Presentment

If not presented to the banker for payment, it does not discharge the drawer unless he suffers injury or damages.

Drawer is discharged, if bill is not presented for payment to the acceptor.

 Noting and Protesting

A cheque is not required to be noted or protested for dishonour.

A bill of exchange may be noted or protested for dishonour.

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