Question

Identify which of the following is true and which is false.
P. A promissory note is a three-party instrument.

Q. In a bill of exchange, there are three parties, drawer, drawee and payee.
R. A promissory note can be made payable to the maker himself.
S. In a bill of exchange, the drawer and payee may be the same person.

Select the correct answer from the options given below-

P Q R S

• A. True False False True
• B. True True True False
• C. False True False True
• D. False False False True

Answer 1

Answer: (C)

False True False True

Essentials of a Bill of Exchange are:

1. A bill of exchange must be in writing.
2. It must be dated and stamped.
3. It has three parties: Drawer, Drawee and Payee.
4. It must be signed by the maker or drawer and payee can also be drawer or vice-versa
5. The name of the drawer must be clearly mentioned.
6. The order must be an unconditional one.
7. It must contain an order to pay money and not goods.
8. The sum payable must be specified.
9. The money must be payable to a definite person or to his order or to the bearer.
10. The amount should be paid within a stipulated time.
11. It must have adequate stamp duty at the prescribed rate.

Promissory notes must contain the following essentials elements;

1. It should be in written shape.
2. It must contain a guarantee to give money.
3. The promise to give money must be unconditional.
4. It must be signed by the maker.
5. The maker should be a certain person.
6. The payee must also be a certain person.
7. It can be paid to the maker as well.
8. The amount must be certain.
9. Payment should be of money only.
10. Time or period of payment should be fixed.