Monday, 22 August 2011

Define the promissory note and discuss the essentials of promissory note or Discuss the preconditions for the valid promissory note

Promissory Note :-
It is an unconditional written promise by one person to another in which the maker (Payer) promises to pay on demand on any future date, a stated sum of money to the specified person or to the bearer of the instrument.

1. Written :-
The promise to pay must be in writing. Oral promise will not be considered.

2. Maker's Signature :-
Promissory note must be signed by the maker or payer.

3. Unconditional :-
The promise to pay must be unconditional. If it contains a conditional promise, it is not a valid.

Example :- I promise to B one lac after the death of A.

4. Definite Sum of Money :-
The amount to be paid must be definite in terms of money, for example I promise to pay one thousand two hundred and fifty paisa 1200/50 only.

5. Time Decision :-
The promissory note must be payable on demand or at a fixed determinable future date.

6. Payee To be Certain :-
The promissory note must be payable to the bearer or to specified person.

Example :- A promissory note payable to the principal of the college is regarded as payable to certain person.

7. Parties Involved :-
There are two parties involved in the promissory note, the maker and the payee. The promissory note may differ in maturity. Some promissory note mature after a long period, some after a year or month and some are payable on demand. A promissory note can be divided into two categories :

1. Secured.

2. Unsecured.

8. Important Point :-

1. The promise to pay must be lawful.

2. The pro-note must be properly stamped.

3. The stamps must be cancelled.

4. The date must be mentioned.

5. The place must be stated where it is made.


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