Business Law

Promissory Note – Meaning, Characteristics And Parties

Promissory Note Meaning –  According to Section 4 of the Indian Negotiable Instruments Act, 1881, “A promissory note is an instrument in writing (not being a bank note or currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money to, or to the order of a certain person.”

Characteristics of Promissory Note

  1. A promissory note is unconditional
  2. It is always in writing; a verbal promise to pay a specified sum of money is not a promissory note.
  3. It is made and signed by the debtor.
  4. It is made as payable to a specified person or to the order of the specified person or to the bearer, after the expiry of a specified duration.
  5. A promissory note should be payable in the currency of the country
  6. Promissory note drawn for a specified duration should be adequately stamped according to its value.
  7. A bank note or currency note is not a promissory note.
  8. Promissory note should be drawn for the payment of a specified sum. However, the acknowledgment of a debt such as an I.O.U is not a promissory note.
  9. The consideration for and the date and place of making the promissory note need not be mentioned in the promissory note.

Parties to a Promissory Note

(1) Maker – He is the debtor who makes the promissory note promising to pay a specified sum after the expiry of a specified duration. There may be one or more makers of a promissory note.

(2) Payee – He is the creditor in whose favour the promissory note is made.

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