What is meant by promissory note?

A promissory note is a financial instrument that contains a written promise by one party (the note’s issuer or maker) to pay another party (the note’s payee) a definite sum of money, either on demand or at a specified future date.

What is a promissory note and how does it work?

A promissory note is a legal promise to repay money borrowed. People can borrow money from each other, or from banks and other lending institutions. When someone borrows money, a promissory note is written to legally protect both the payor and the payee.

Who pays 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.

What is the purpose of a promissory note?

A Promissory Note is a unique financial instrument which binds the borrowers by law to pay the lender the specified sum of money at a specified date or on demand.

What is the difference between a promissory note and an IOU?

What Is a Promissory Note? Promissory notes may also be referred to as an IOU, a loan agreement, or just a note. It’s a legal lending document that says the borrower promises to repay to the lender a certain amount of money in a certain time frame. This kind of document is legally enforceable and creates a legal obligation to repay the loan.

Is the money payable under a promissory note expressible?

The money payable under a note must always be expressible in legal tenders like Rupees or Dollars. Hence, a maker of a note cannot promise to pay the payee with bags of grains. Apart from these elements, a typical promissory note has other important requires as well. For example, the maker has to stamp the notes according to the Indian Stamp Act.

Can a conditional promise be made on a promissory note?

Hence, a conditional promise cannot form the basis of such notes. For example, one cannot promise to pay money only if he has it, as that amounts to a condition. However, promising to pay on a specific date or upon the happening of an inevitable event is fine. For example, A can promise to pay B three years from the date of the note’s execution.