The promissory note is a negotiable instrument. It is an unconditional undertaking written by the maker who signs the same. The unconditional undertaking is to pay a sum of amount to any person as mentioned in the note or to the bearer of the instrument. The maker is the one who makes the instrument. He is the one who promises to pay the amount as mentioned. He signs the instrument and ratifies his unconditional undertaking. The maker of the instrument pays the amount to another person who is called the payee.
The instrument to be known as or to become a promissory note it must satisfy some features and must have some essential elements. The essential elements of a promissory note are as follows;
The promissory note must be in writing
Verbal engagement or orally promising to pay is not enough in the case of a promissory note. The instrument must be in writing to become a promissory note. Printed instrument or typed instrument or a written one with pencil or a pen would become a promissory note.
The promissory note is a promise to pay
Promise to pay is an expression essentially must be reflected on the instrument. Mere acknowledgement with words such a debt or pronote aren't sufficient to consider the instrument as a promissory note. A receipt for money when contains the phrase promise to pay, it become a promissory note and when the same doesn't contains the said phrase, the instrument is not a promissory note.
The promissory note must be definite and promissory note must be unconditional
If the promissory note is not definite or uncertain and it is conditional, the instrument is not a promissory note. It should be an unconditional undertaking and hence a promissory note shall be unconditional and definite.
Promise to pay a certain amount on convenience, promise to pay a part of certain amount when alive and rest would be defaulted on death, promise to pay a certain amount only after someone deliver goods and promise to pay a certain amount on happening of a profitable event are shall not be in the instrument to qualify the same to be a promissory note.
Promise to pay a certain amount on death of a person, promise to pay a certain amount after ten days after a certain event, promise to pay a certain amount at a place after a certain time are all can be added to the instrument and the same would not make the instrument to be ineligible to become a promissory note. This is because there is come certain issue mentioned in there.
The promissory note must be signed
The maker of the promissory note must sign the instrument and then only the instrument becomes a promissory note. The maker is the one who is agreeing for an unconditional undertaking and so the sign of the same is very essential on the promissory note. Even if the maker is the only one who writes the instrument, mere writing isn't enough, the maker must sign the instrument.
The promissory note must have certain parties
Essential things about the maker and the payee must be duly mentioned in the promissory note. When both the parties cannot be identified the instrument doesn't become a promissory note.
It is important to remember that the maker cannot pay himself i.e. the maker cannot be the payee. In that case, the promissory note would become invalid. Indorsement of the instrument by the maker in blank makes the instrument a promissory note.
The promissory note must have certain amount
The amount shall be certain and shouldn't provide for addition or subtraction to that amount. It is valid in this following case; when the certain amount is payable with interest, the interest rate shall be disclosed otherwise it would not be a promissory note.
The promissory note must be used to pay money only
The amount mentioned in the promissory note shall be paid in legal tender money only. A promise to pay anything other than money invalidates the instrument to become a promissory note.
A promissory note is not a bank note or a currency note
The bank note cannot be a promissory note and the currency note too is not a promissory note.
A promissory note need not to have in it date, place and other such related issues
The date, place, numbers, considerations and all these things are not essentially to be in a promissory note. And their absence doesn't invalidate anything and even the law doesn't need them essentially. The date is needed only when the promise is to pay after or at a certain time. The stamping is however needed for the instrument to be a promissory note.
The promissory note shall be paid on demand or promissory note shall be paid after certain time
If the promissory note shall be paid on demand, then the payee shall present the instrument before the maker for the payment. Promissory note shall be paid after certain definite period means the payee would get his sum of money only after that definite period as mentioned in the promissory note.