Banking News

Definition of Promissory Note

Section 4 of NI Act 1881 states that “ A promissory note is an instrument in writing (not being a bank note or currency note), containing an unconditional undertaking, signed by the maker, to pay certain sum of money only to, or to the order of a certain person or to the bearer of the instrument”

From the above section 4 of NI act, we understand that a promissory note which is signed by the maker is a negotiable instrument. It is actually an undertaking from the debtor to pay a certain sum of amount to the creditor or to his order. The person who promises to pay is called as the maker and the person to whom payment is promised is called as the payee or holder. A promissory note can be either payable on demand or at a specific time.

The characteristic of promissory note is that it should be in writing and signed by the maker. Further, the maker should be certain, the payee must be certain, the amount should be certain and it should be in terms of only money.

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