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Comparison Chart

Basis for
Comparison
Meaning

Defined in
Parties
Drawn by
Liability of Maker
Can maker and
payee be the same
person?
Copies

Bill of Exchange

Promissory Note

A promissory note is a written promise


Bill of Exchange is an instrument in
made by the debtor to pay a certain sum of
writing showing the indebtedness of
money to the creditor at a future specified
a buyer towards the seller of goods.
date.
Section 5 of Negotiable Instrument Section 4 of Negotiable Instrument Act,
Act, 1881.
1881.
Three parties, i.e. drawer, drawee and
Two parties, i.e. drawer and payee.
payee.
Creditor
Debtor
Secondary and conditional
Secondary and conditional
Yes

No

Promissory Note cannot be drawn in


copies.
Notice is necessary to be given to all Notice is not necessary to be given to the
the parties involved.
maker.
Bill can be drawn in copies.

Dishonor

Content: Sale Vs Agreement to sell


A Contract of Sale is a type of contract whereby one party (seller) either transfers the ownership of
goods or agrees to transfer it for money to the other party (buyer). A contract of sale can be a sale or an
agreement to sell. In a contract of sale, when there is an actual sale of goods, it is known as Sale
whereas if there is an intention to sell the goods, it is called an Agreement to sell. There is a little bit of
confusion, regarding these two terms. Here we have presented, the differences between Sale and
Agreement to sell for clear understanding.

Content: Sale Vs Agreement to sell


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4.

Comparison Chart
Definition
Key Differences
Conclusion

Comparison Chart

Basis for Comparison


Meaning
Nature
Type of Contract
Transfer of risk
Title
Right to sell
Consequences of
subsequent loss or
damage to the goods
Tax

Sale
When in a contract of sale, the
exchange of goods for money
consideration takes place
immediately, it is known as Sale.
Absolute
Executed Contract
Yes
In sale, the title of goods transfers
to the buyer with the transfer of
goods.
Buyer

Agreement to sell
When in a contract of sale the parties to
contract agree to exchange the goods for a
price at a future specified date is known
as an Agreement to Sell.
Conditional
Executory Contract
No
In an agreement to sell, the title of goods
remains with the seller as there is no
transfer of goods.
Seller

Responsibility of buyer

Responsibility of seller

VAT is charged at the time of sale.


The buyer can claim damages from
Suit for breach of
the seller and proprietary remedy
contract by the seller from the party to whom the goods
are sold.
Right of unpaid seller Right to sue for the price.

No tax is levied.
Here the buyer has the right to claim
damages only.
Right to sue for damages.

Definition of Sale
A sale is a type of contract in which the seller transfers the ownership of goods to the buyer for a
money consideration. Here the relationship amidst the seller and buyer is of creditor and debtor. It is
the result of an agreement to sell when the conditions are fulfilled and the specified time is over. The
following are the essential conditions regarding Sale:
1.
2.
3.
4.
5.

There must be at least two parties; one is the buyer, and other is the seller.
The subject matter of the sale is the goods.
Payment should be made in the countrys legal currency.
The goods should pass from seller to buyer.
All the necessary conditions of a valid contract should be present like free consent,
consideration, a lawful object, capacity of parties, etc.

If the goods are being sold and the property is transferred to the buyer, but the seller is not paid. Then,
the seller can go to the court and file a suit against the buyer for the damages and the price too. On the
other hand, if the goods are not delivered to the buyer then he can also sue the seller for damages.

Definition of Agreement to Sell


An agreement to sell is also a contract of sale of goods, in which the seller agrees to transfer goods to
the buyer for a price at a later date or after the fulfillment of a condition.
When there is a willingness of the both the parties to constitute a sale i.e. the buyer agrees to buy, and
the seller is ready to sell the goods for monetary value. In an agreement to sell the performance of the
contract is done at a future date, i.e. when the time elapses or when the necessary conditions are
satisfied. After the contract is executed, it becomes a valid sale. All the necessary conditions required at

the time of sale should exist in the case of an agreement to sell too.
If the seller rescinds the contract, then the buyer can claim damages for the breach of contract. On the
other hand, the unpaid seller can also sue the buyer for damages.

Key Differences Between Sale and Agreement to Sell


The following are the major differences between sale and agreement to sell:
1. When the vendor sells goods to the customer for a price, and the transfer of goods from the
vendor to the customer takes place at the same time, then it is known as Sale. When the seller
agrees to sell the goods to the buyer at a future specified date or after the necessary conditions
are fulfilled then it is known as Agreement to sell.
2. The nature of sale is absolute while an agreement to sell is conditional.
3. A Sale is an example of Executed Contract whereas the Agreement to Sell is an example of
Executory Contract.
4. Risk and rewards are transferred with the transfer of goods to the buyer in Sale. On the other
hand, risk and rewards are not transferred as the goods are still in possession of the seller.
5. If the goods are lost or damaged subsequently, then in the case of sale it is the liability of the
buyer, but if we talk about an agreement to sell, it is the liability of the seller.
6. Tax is imposed at the time of sale, not at the time of agreement to sell.
7. In the case of a sale, the right to sell the goods is in the hands of the buyer. Conversely, in
agreement to sell, the seller has the right to sell the goods.

Conclusion
Under Indian Sale of Goods Act 1930, section 4 (3) deals with the Sale and Agreement to sell, where it
has been clarified that the agreement to sell also come under sale. However, there is a distinction
between these two terms which we discussed above.

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. Bill of Exchange is a
document contains an unconditional order, directing a person, to pay a certain amount to a specified
person. These two terms sound the same, which becomes the cause of confusion for many people.
Come, lets start understanding the difference between Cheque and Bill of Exchange.

Content: Cheque Vs Bill of Exchange


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5.

Comparison Chart
Definition
Key Differences
Similarities
Conclusion

Comparison Chart

Basis for
Comparison
Meaning
Defined in

Cheque
A document used to make easy payments on
demand and can be transferred through hand
delivery is known as cheque.
Section 6 of The Negotiable Instrument Act,
1881
3 months

Validity Period
Payable to bearer
Always
on demand
Not Applicable, as it is always payable at the
Grace Days
time of presentment.
Acceptance
Stamping
Crossing
Drawee
Noting or
Protesting

Bill of Exchange
A written document that shows the
indebtedness of the debtor towards
the creditor.
Section 5 of The Negotiable
Instrument Act, 1881
Not Applicable
Cannot be made payable on
demand as per RBI Act, 1934
3 days of grace are allowed.

Bill of exchange needs to be


accepted.
No such requirement.
Must be stamped.
Yes
No
Bank
Person or Bank
If the cheque is dishonoured it cannot be noted If a bill of exchange is dishonoured
or protested
it can be noted or protested.
A cheque does not require acceptance.

Definition of 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 5-012015 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.