The definition of promissory notes can be found in Section 4 of the Negotiable Instruments Act. According to the definition, promissory notes are essentially written representations of instruments. Nevertheless, they are not bank notes or currency notes, both of which also have this characteristic attached to them.
A further significant component of the concept of promissory notes is that they are agreements that are not subject to any conditions. The person who created these notes has made a commitment to pay a specific amount to either a specific individual or the bearers of the notes. By affixing his signature to the notes, this creator acknowledges that he should be responsible for making payments.
The Parties to Promissory Notes
Within every single promissory note, there are always three significant parties involved. These individuals consist of the maker, the payee, and the holder of the document. Under some circumstances, even endorsers and endorsees can be considered parties.
1) The maker: Here, we are referring to the individual who creates or executes a promissory note and pays the sum that is included within it.
2) The payee: The payee is the individual to whom a note is designated to be received.
3) The holder: A holder is, in essence, the individual who is in charge of holding the notes. It is possible that he is the payee, or that he is somewhere else.
Some essentials feature that make up a legal promissory note are:
- Writing: the note must be written down.
- A clear promise to pay: There must be a clear promise to pay in the promissory note. A promise to pay or an admission of debt is not the same thing as a promissory note. Because of this, the examples in (c) are not a promissory note.
- Promise to pay no matter what—The promise to pay a certain amount must be true no matter what. A promise note that depends on something that is certain to happen is still a good promise note. Notes (d) are not legal promissory notes because of this, but notes (e) are valid.
- A promise to pay in money: The paper must only be payable in money.
- Amount due must be certain: The amount due must be certain. Because of this, instruments at (f) and (g) are not legal promissory notes.
- Certain parties: There must be no doubt about who is signing the document. That person making the payment and that person getting the payment must be able to be found.
- It must be signed: The instrument is only complete after the person who made it signs it.
- It has to have the stamp on it: A promissory note has to be properly cancelled and marked according to the Indian Stamp Act, 1899.
- Other formalities: A promissory note usually has formalities like the date, place, amount of money paid, and so on.
- Requisites of a contract to be complied with: All of the things that are needed for a contract to be valid must be present, such as the ability to contract, consideration, free consent, and a lawful target.
Bill of Exchnage
If someone writes down a bill of exchange and has it stamped and signed by the person who holds it, it is also a tradable tool. It tells the bank to give the person who owns this document a certain amount of money on demand or within a certain amount of time. For these to be valid, the debtor must agree to them. They are generally payments for goods and services. These things are some of the things that it has.
- It needs to have the right date on it.
- possesses an order of payment
- It is required that the drawer or maker sign it.
- A drawee must agree to accept the bill.
- The amount and order of payment should be made clear.
It needs to be sent to the right receiver.
The following three people are involved:
Drawer: The person who issued the document and gets the money.
Drawee: The person or thing that needs to pay the amount.
Payee: The payee is the person who gets paid, and this person is usually the same as the drawer.
Some essentials feature that make up a legal promissory note are:
- Number of parties: There are three parties to a bill of exchange: a) the writer, who signs it; b) the drawee, who has to pay; and c) the drawee. c) the person who is owed the money, or the payee. There are times when the drawer and the payee can be the same person.
- Must be written down: The Bill of Exchange must be written down.
- An order to pay right away: This is what a bill of exchange is all about. “Order by the drawer to the drawee to pay” is what it means. The order needs to be a command, not a too-big ask.
- Order must be unconditional: There must be no conditions on the order to pay. That is, it must be certain that the situation will happen.
- Order to pay money only: The document must be for money only, just like a promissory note.
- Amount due must be certain: The amount due must be certain. The amount that needs to be paid through the Bill of Exchange should be clear.
- Must be signed:It must be signed by both the drawer and the drawee. The instrument is only complete when both of them sign it.
- Must bear the stamp:It must have the stamp placed on it. A Bill of Exchange must be properly cancelled and marked in line with the Indian Stamp Act, 1899.
- Acceptance: The drawee must agree to the terms.
- Formalities: A Bill of Exchange usually has formalities like the date, place, amount of money paid, and so on.
- Requisites of a contract to be compiled with: Things that must be true for a contract to be valid: Ability to contract, consideration, free consent, and a lawful goal must all be present for a contract to be valid.
- Two parallel debts can be discharged here: This can be used to pay off two bills at the same time, with drawee having the main responsibility and drawer having the secondary responsibility.
