7 Difference Between Cheque and Bill of exchange

Cheque and bill of exchange both are used to give payments. Check is a formatted form which is issued by the bank against the bank account. The Check contains an unconditional order for the bank to provide payment to a third person. A bill of exchange is a document which contains an order to a person to pay a written amount to a specific payee.

Negotiable instruments are used for the payments to the third person. There are three types of the negotiable instrument which are used for the payments. Negotiable instruments are promissory, cheque and bill of exchange. So it’s very important to understand the concept of cheque and bill of exchange. In this article we will discuss in detail about the cheque and bill of exchange.

Cheque vs Bill of Exchange

Sr. No.	Cheque	Bill of Exchange
1	Negotiable instrument in which payment is paid by the one person to third person through the bank.	Instrument in which payment is paid between person to person after the pre-defined time.
2	Defined in section six of instrument act 1881.	Defined in section five of the negotiable instrument act 1881.
3	Drawer and payee are always different	Drawer and payee are the same
4	No need of stamp.	Always stamped.
5	No Grace days allowed	Grace days are allowed
6	No need of Acceptance	Acceptance is very important
7	May be crossed	Can’t be crossed.

Cheque

Cheque is a negotiable instrument which is used to do the payments for the third person. Cheque book is provided by the bank against the bank account. With the check payment becomes very easy for the drawer. Cheque is a pre printed formatted form like page which contains bank name, account number, and some blank rows which have to be filled by the drawer. Check is an unconditional document which contains an order for the bank to pay a written amount to the po payee.

Checks are always formed on demand. Payee gets money after presenting the cheque in the bank. It is very important to sign the cheque by the drawer. Without the sign of the drawer, the check is useless.

There are three parties which involves in the cheque payment

1. Drawer : is the person who makes or issues cheque.
2. Drawer : In case of a check, always a bank.
3. Payee : who gets the payment.

a check is always present before the three months from the issue date. After the three month check is automatically canceled. Many times cheque may be canceled. For this many reasons occur like insufficient balance in the account, damaged check and mismatch the sign of the drawer in bank and on cheque.

Bill of exchange

It is also a negotiable instrument which is used for the payment of payments. Bill of exchange contains an order to the drawee to pay a written amount to the payee. These kinds of bills are made by the drawer and signed. This bill contains a predefined date on which money has to be paid to the payee. This bill is made by the drawer and accepted by the drawee. Three days are allowed to the drawee for the payment delays. It is defined in section 5 of the negotiable instrument act 1881.

For example

Ravi purchases goods from the Yash. At the time of buying, Ravi doesn’t have the money to pay. In this case Ravi asks Yash to credit the goods at this and say he will pay after 2 months. In this case Yash issues a bill of exchange and mentions the amount and dates of bill making and paying. After signing it and also taking the sign of Ravi. Ravi accepts this bill of exchange.  In this case the drawer and payee is Yash and Drawee is Ravi because Ravi have to pay the payment.

Parties involved in it

Drawer – who issues the bill.

Drawee – who accepts the bill of exchange.

Payee – who received the payment.

In the bill of exchange mostly the drawer and payee are the same person.

Main Differencee Between Cheque and Bill of Exchange.

1. Cheque is a negotiable instrument in which payment is paid by the on person to third person through the bank. Bill of exchange is an instrument in which payment is paid between person to person after the pre-defined time.
2. Bill of exchange is defined in section five of the negotiations instrument act 1881. Check is defined in section six of instrument act 1881.
3. Drawer and payee are the same in the bill of exchange. Drawer and payee are always different in cheque.
4. Bill of exchange is always stamped. No need for a stamp on the check.
5. Grace days are allowed in the bill of exchange. No Grace days allowed in check.
6. No need of Acceptance in case of check. Acceptance is very important in case of a bill of exchange.
7. Cheque may be crossed. Bill of exchange can’t be crossed.

Conclusion

Cheque and bill of exchange are used to make the payments. Bill of exchange is used when someone purchases the goods from the second person and he doesn’t have to pay the amount at the time of purchase. In this case, the person who sells the goods issues the bill of exchange. In check three parties are involved in the payment. While mostly two parties involved in the transactions of the bill of exchange. There are three types of the negotiable instrument which are used for the payments. Negotiable instruments are promissory, cheque and bill of exchange.

This is all about cheque and bill of exchange. We hope you understand the topic very well. You are free to comment on us in case of any confusion and doubt. If you want to read more interesting blogs on differences please visit our website.