Promissory Note
Promissory Note
DEFINITION
A “promissory note” is 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.
ESSENTIALS OF PROMISSORY NOTE
1. In writing
The first essential is that all negotiable instruments must be in writing.
An oral agreement to pay a certain sum of money is not an instrument.
2. An undertaking to pay
The second essential element of a promissory note is an express promise
to pay. A mere acknowledgment or receipt of indebtedness without an
express promise to pay the debt is not a promissory notice.
Ex: “Mr. X, I.O.U. (I owe you) Rs. 5000.”
In Laxmi Bai v. Raghunath, AIR 1929 Bom. 373, it has been held that it
is simply acknowledgment of debt without promise to pay, hence is not a
promissory note.
CONT….
3. Unconditional promise or undertaking to pay
A promise is unconditional when it is not subject to any condition. If A
promises to pay B Rs. 5000 if B marries C. This is conditional promise
because it is not certain that B will marry C or B or C dies before
marriage.
4. Signed by the maker
The promissory note must be signed by the maker and without signature
of the maker the instrument is incomplete and of no effect. Where the
maker of a note, drawer of a bill or cheque or an endorser unable to write
his name he may sign by a mark.
The promissory note should be signed by all of joint promisors except in
case of partners. An agent may also sign provided there should be an
authority to sign. In case of unauthorized signature of an agent principal
may ratify. Where maker is an illiterate his thumb impression will suffice.
CONT….
Rs. 5000.00
Gorakhpur
Nov. 15, 2008
A (signature of maker)
ILLUSTRATIONS
A signs instruments in the following terms:-
(a). “I promise to pay B or order Rs. 500.”
(b). “I acknowledge myself to be indebted to B in
Rs. 1,000, to be paid on demand , for value
received.”
(c). “Mr. B I.O.U. Rs. 1,000.”
(d). “I promise to pay B Rs. 500 and all other sums
which shall be due to him.”
CONT….
(e). “I promise to pay B Rs. 500 first deducting there out any money
which he may owe me.”
(f). “I promise to pay B Rs. 500 seven days after my marriage with C.”
(g). “I promise to pay B Rs. 500 on D’s death, provided D leaves me
enough to pay that sum.”
(h). “I promise to pay B Rs. 500 and to deliver to him my black horse on
1st January next.”