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Cheque is an instrument which contains an unconditional order, drawn on a

banker, directing to pay a certain sum of money to the person whose name is
specified in the instrument. In contrast, Bill of Exchange is a document
contains an unconditional order, directing a person, to pay a certain amount to a
specified person.

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Difference Between Cheque and Bill of Exchange


April 7, 2015 By Surbhi S 4 Comments

Cheque is an

instrument which contains an unconditional order, drawn on a banker, directing


to pay a certain sum of money to the person whose name is specified in the
instrument. In contrast, Bill of Exchange is a document contains an
unconditional order, directing a person, to pay a certain amount to a specified
person.

A negotiable instrument is a written document, which entitles a certain amount


and is transferable from one person to another, by simple delivery or by
endorsement and delivery. There are three types of a negotiable instrument as
per statute, i.e. cheque, bills of exchange and promissory note. There are many
instances when people juxtapose cheque for a bill of exchange, but they are
different, in the sense that a bill of exchange requires acceptance, whereas there
is no need for acceptance in cheque.
Go through with this article to learn some more differences between cheque and
bill of exchange.

Content: Cheque Vs Bill of Exchange

1. Comparison Chart

2. Definition

3. Key Differences

4. Similarities

5. Conclusion

Comparison Chart
BASIS FOR
CHEQUE
COMPARISON

Meaning A document used to make easy payments on demand and can be transf
hand delivery is known as cheque.

Defined in Section 6 of The Negotiable Instrument Act, 1881

Validity Period 3 months

Payable to bearer on Always


demand

Grace Days Not Applicable, as it is always payable at the time of presentment.

Acceptance A cheque does not require acceptance.

Stamping No such requirement.

Crossing Yes

Drawee Bank
BASIS FOR
CHEQUE
COMPARISON

Noting or Protesting If the cheque is dishonoured it cannot be noted or protested

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Cheque
A cheque is a type of bill of exchange, used for the purpose of making payment to
any person. It is an unconditional order, addressing the drawee to make payment
on behalf the drawer, a certain sum of money to the payee. A cheque is always
payable on demand, i.e. the amount is paid to the bearer of the instrument at the
time of presentment of the cheque. It is always in writing and signed by the
drawer of the instrument.

There are three parties involved in case of cheque:

Drawer: The maker or issuer of the cheque.

Drawee: The bank, which makes payment of the cheque.


Payee: The person who gets the payment of the cheque or whose name is
mentioned on the cheque.

It should be noted that the issuer must have an account with the bank. There is a
specified time limit of 3 months, during which the cheque must be presented for
payment. If a person presents the cheque after the expiry of 3 months, then the
cheque will be dishonored. The various types of cheques are:

Electronic Cheque: A cheque in electronic form is known as an


electronic cheque.

Truncated Cheque: A cheque in paper form is known as truncated


cheque.

Definition of Bill of Exchange


A bill of exchange is a negotiable instrument, contains an unconditional order,
directing the drawee to pay a certain sum of money to payee addressed in the
instrument. The bill is made and signed by the drawer and accepted by the
drawee. It contains a pre-determined date on which the payment is to be made to
the payee. It can be payable on demand when the bill is discounted with the bank.
The parties to the bill of exchange must be certain.

There are three parties involved in the bill of exchange, they are:
Drawer: The maker of the bill of exchange.

Drawee: A person on whom the bill is drawn, i.e., the person who gives
acceptance to make payment to the payee.

Payee: The person who gets the payment.

There are three days of grace allowed to the drawee, to make payment to the
payee, when it becomes due. You might wonder about the days of grace, lets
understand it with an example: A bill is drawn on 5-10-2014 in the name of X, to
make payment to Y after 3 months. The bill will become due on 5-01-2015 while
the date of maturity is 8-01-2015 because of 3 days of grace are added to it. The
following are the types of bill of exchange:

Inland Bill

Foreign Bill

Time Bill

Demand Bill

Trade Bill

Accommodation Bill

Key Differences Between Cheque and Bill of Exchange

1. An instrument used to make payments, that can be just transferred by


hand delivery is known as the cheque. An acknowledgment prepared by the
creditor to show the indebtedness of the debtor who accepts it for payment is
known as a bill of exchange.

2. A Cheque is defined in section 6 while Bill of Exchange is specified in


section 5 of the Negotiable Instrument Act, 1881

3. The drawer and payee are always different in the case of a cheque. In
general, drawer and payee are the same persons in the case of a bill of exchange.

4. The stamp is not required in cheque. Conversely, a bill of exchange must be


stamped.
5. A cheque is payable to the bearer on demand. As opposed to the bill of
exchange, it cannot be made payable to the bearer on demand.

6. The cheque can be crossed, but a Bill of Exchange cannot be crossed.

7. There is no days of grace allowed in cheque, as the amount is paid at the


time of presentment of the cheque. Three days of grace are allowed in the bill of
exchange.

8. A cheque does not need acceptance whereas a bill needs to be accepted by


the drawee.
Similarities

They are Negotiable Instrument.

Addressing the drawee to make payment.

Always in writing.

Signed by the drawer of the instrument.

Express order to pay a certain amount.

Conclusion
Cheque and Bill of Exchange both are used to make payments easily. However,
the cheque itself is a type of bill of exchange, used to discharge the liabilities and
so it consists of all the features of a bill of exchange. Not only in business, but
individuals, government agencies, and other institutions also use the cheque to
make payments but the bill of exchange is mostly used in business.

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