What is Promissory Notes

Promissory Notes:

According to section 4 of Negotiable instrument Act 1881, A promissory note is an instrument in writing ( not being a bank note or currency note) containing an unconditional undertaking, signed by maker to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instruments. Under section 31(2) of the reserve bank of India Act a promissory note cannot be made payable to bearer.

          It has following feature or characteristics :-

1.        It must be in writing and unconditional promise to pay.

2.         Mere acknowledgement of debt is not promissory note.

3.        The person who makes promise(promisor) to pay must sign the instrument.

4.        The payee must be certain person.

5.        Amount payable on promissory note must be certain Amount. It must not contain contingent additions or subtractions for example, promise to pay Rs.10,000/- including all fines and penal interest is not certain.

6.        payment must be in legal currency of the country.

7.        It should  not be made payable to bearer.

8.        It should be properly stamped.

·       When we talk about Bill of Exchange it includes Promissory Notes also.

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