What is a Promissory Note?
Promissory note is a written promise to pay a debt. It is a financial instrument, in which one party (maker or issuer) promises in writing to pay a determinate sum of money to the other (the payee), either at a fixed, determinable future time or on demand of the payee subject to specific terms. A promissory note is an instrument of credit which posses the characteristics of negotiability.
Thus, a promissory note generally means a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand. A promissory note can be either payable on demand or at a specific time. If the promissory note is unconditional and readily salable, it is called a negotiable instrument.
As per section 4 of the Negotiable instrument Act a promissory note is ” an instrument in writing (not being a bank note or a currency note) containing unconditional undertaking, signed by the maker, to pay a certain sum money only to or to the order of
bearer of the instrument”.
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