promissory note
Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as an instrument in writing (not a bank note 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 to the bearer of the instrument. A pronote has two parties, maker and payee, unlike a bill of exchange, which has a drawer, drawee and payee.
The essentials are writing, an express promise (a mere acknowledgment of debt is not enough), unconditional terms, a certain amount, and a certain payee. A pronote cannot be made payable to bearer on demand by a private person, because of the Reserve Bank of India Act. It must be stamped.
Example
An “IOU” that only acknowledged a debt, without any promise to pay, was not a promissory note.
In Indian law
- s.4, Negotiable Instruments Act, 1881
- s.31, Reserve Bank of India Act, 1934 (bar on bearer-on-demand instruments)
See also
negotiable instrument · bill of exchange · cheque · holder in due course
Read more in the study notes
- Negotiable instruments: meaning, characteristics, promissory note, bill of exchange and cheque (Banking Law)
- Holder and holder in due course, parties to instruments, their liability and payment in due course (Banking Law)
- Negotiation, endorsement, assignment and presentment (Banking Law)
- Dishonour, noting and protest, acceptance for honour, material alteration, special rules of evidence and bills in sets (Banking Law)
- Offences relating to elections, coin and currency (Bharatiya Nyaya Sanhita)
- Forgery and property marks (Bharatiya Nyaya Sanhita)