Promisory Notes – Features, parties and Definition

Meaning Definition Parties

Definition Features

Meaning

Definition

Parties

Specimen

Comparison

ComparisonFeatures

Promisory Note- Meaning

A Promisory Note is a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand. In other words it is a legal instrument, in which one party promises in writing to pay a determinate sum of money to the other under specific terms.

Promisory Note- DefinitionAccording to the Negotiable Instruments Act 1881, a promissory note is defined as an instrument in writing (not being a bank note or a currency note), containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or to the order of a certain person, or to the bearer of the instrument.

According to the Reserve Bank of India Act, a promissory note is not a bearer instrument.

Parties to a Promisory Note

1. Drawer is the person who makes or draws the promissory note to pay a certain amount as specified in the promissory note. He is also called the promisor.2. Drawee or Payee is the person in whose favour the promissory note isdrawn. He is called the promisee.

Drawer ----- Drawee

• It must be in writing• It must contain an unconditional promise to pay.• The sum payable must be certain.• It must be signed by the maker.• The maker must sign it.• It must be payable to a certain person.• It should be properly stamped.

Basis Bill of Exchange Promisory Note

Drawer It is drawn by the creditor It is drawn by the debtor

Order or promise

It contains an order to make the payment

It contains a promise to make the payment

Acceptance

It requires acceptance by the Drawee or someone else on his behalf

It does not require anyacceptance.

Payee Drawer and payee can be the same party.

Drawer cannot be the payeeof it.