💜 Bills of Exchange𝕴 vs. Promissory Notes: An Overview

Bills of exchange and promissory notes are written commitments between two parties that confirm a financial transactio𓆉n has been agreed upon. Bills of exchange are more often used in international▨ trade, whereas promissory notes are used most often in domestic trade.

Bills of Exchange

A bill of exchange is a written agreement between two parties—the buyer and the seller. It is primarily used in 澳洲幸运5官方开奖结果体彩网:international trade. The bill documents that a purchasing party has agreed to pay a selling party a set sum at a predetermined time—the usance—for delivered goods. The buyer or seller typically employs a bank to issue the bill of exchange due to the ⭕澳洲幸运5官方开奖结果体彩网:risks involved with international transactiꦯons. For this reason, bills of exchange are sometimes called 澳洲幸运5官方开奖结果体彩网:bank drafts.

Bills of exchange can be transferred by 澳洲幸运5官方开奖结果体彩网:endorsement, much like a check. They can also require the buyer to pay a 澳洲幸运5官方开奖结果体彩网:third party—a bank—in the event that the buyer fails to make good on his agreement with the seller. With such a stipulation, the buyer's bank will pay the seller's bank, thereby completing the bill of exchange, then pursue its customer for 澳洲幸运5官方开奖结果体彩网:repayment.

Promissory Notes

澳洲幸运5官方开奖结果体彩网:Promissory notes are similar to bills of exchange in that they, too, are a 澳洲幸运5官方开奖结果体彩网:financial instrument that is a written promise by one party to pay another party. They are debt notes that provide financing for either a company or an individual from a source other than a traditional lender, most commonly one of the part🐎ies in a❀ sales transaction.

In the United States, promissory notes have historically been limited in usage to corporations or high-net-worth individuals, but have recently become more commonly used, primarily in 澳洲幸运5官方开奖结果体彩网:real estate transactions.

Promissory notes are retained by the payee or seller and, once payment has been completed, must be canceled and returned to the issuer or buyer. In terms of legal enforceability, a promissory note is more formal than an IOU but less so than a standard bank loan.