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
- A promissory note is unconditional
- It is always in writing; a verbal promise to pay a specified sum of money is not a promissory note.
- It is made and signed by the debtor.
- 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.
- A promissory note should be payable in the currency of the country
- Promissory note drawn for a specified duration should be adequately stamped according to its value.
- A bank note or currency note is not a promissory note.
- 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.
- 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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