A promissory note is an instrument that contains the written and signed promise by the maker(the debtor) to pay a certain amount to the creditor at the specific date or on-demand.
“A Promissory Note is writing (not being a banknote or 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 the bearer of the instrument”.
-Section 4 of India’s Negotiable Instruments Act, 1881
The feature of the Promissory Note: –
- It is in writing.
- An unconditional promise to pay a certain sum of an amount.
- An amount should be described in it.
- It must be signed by the maker or issuer.
- The document must be dated and properly stamped.
- The amount must be payable to either a certain person or on his/her behalf.
- It clearly mentions the date of payment.
The Parties Involved in the PO:-
There are three parties are involved, shown as follows:-
1. Drawer: –
The maker is the person who writes the promissory note or who promise in writing to the payee(receiver) to pay a certain amount on a specific date or on the demand.
2. Payee: –
The person to whom the payment is made is known as the payee.
Contents of Promissory Note: –
Bills of Exchange include the following contents: –
1. Title of note : –
The title “Promissory Note” will be mention on the face of the document.
2. Date of drawn: –
The date of drawn a bill should be written on it.
3. Amount to be paid: –
The certain amount payable will be described on it in the figures and also in words.
4. Date of payment or Term: –
The specific date or the term of the note will be mention on it. The term means for 2 months or 3 months etc. The term is the tenure of the bill and runs from the date of the bill. There will be a grace period of 3 days in addition to the total term of the bill.
5. Unique Identification Number: –
Every note has a unique identification number. it will be mention on it.
6. Name of Maker(issuer or Borrower): –
The name of the maker must be mention on it.
7. Signature of Maker(issuer or Borrower): –
The bill is also signed by the maker.
The format of Promissory Note: –
The following image shows the specimen of the Promissory Note:
These following are the some oldest original document of the Promissory Note.
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