Promissory Note - A brief Introduction and Features

 Promissory Note - A brief Introduction and Features

The Sec. 4 of the negotiable instruments act defines a Promissory Note 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.

The person who makes promissory note and promises toon e pers  pay is called the maker and the person to whom the amount is payable is called the payee. It is always drawn by the debtor in favour of creditor. A promissory note must be in writing, containing an unconditional promise to pay a certain money to a certain person. It must be duly stamped. Below is the specimen of a Promissory Note.

Essential Characteristics of a Promissory Note :

1. Writing : The promissory note to be valid must be in writing. Oral promise to pay certain sum after some time is not called a promissory note. It may be in any form written or printed.
2. Promise to Pay : The promissory note to be valid must contain express undertaking or promise to pay certain amount on certain date. A mere accepting of a debt is not promissory note. A valid promissory note must contain the following sentence. 
• "I Promise to pay X on order Rs. _______________/- "
3.  Unconditional Undertaking : The promise to must be unconditional, absolute and should not depend on happening or not happening an event. For example, the document contains a sentence. "I promise to pay as soon as possible a sum of Rs. 10,000. It cannot be identified as promissory note such premisses will create uncertainty of payment and therefore it is not a promise.
4. Signed by the Maker : The promissory note to be valid must be signed by the debtor who makes it. It can be signed by the agent also, but the Agent must specify that he is signing on behalf of a debtor otherwise he will be personally liable.
5. The maker Must be Certain : The promissory note must show clearly who is the person undertaking to pay the amount. Maker is taken as certain if from the description of the maker, sufficient indication follows about his identity.
6. Payable to a Certain Person : The payee must be certain. the instrument must identify with certainty to whom the amount is payable. The payee may be ascertained either by name or designation. The promissory note is payable only to certain person named or identified but not to a bearer on demand. 
7. Promise to Pay Money and Money Only : The promissory note should contain a certain sum of legal tender money only but not goods. A promise to deliver goods either in the alternative or addition to money does not constitute a promissory note. 
8. Amount Payable Must be Certain : The amount payable on promissory note must be certain and definite. According to Sec. 5 of the Negotiable Instruments Act, the sum payable may be certain, inspite of the fact that, 
1. it includes future interest, or
2. it is payable at an indicated rate of exchange, or
3. it is payable according to the course of exchange.
9. Delivery Essential : The promissory note is to be delivered to creditor by the debtor. Unless it is delivered, it does not constitute as a promissory note.
10. Other Formalities : The other formalities regarding number, place, date consideration etc. though usually essential but not essential in law. But the promissory note must be properly stamped as required by the Indian Stamps Act.