Promissory note: UPSC Daily Important Topic | 14 January 2022

Promissory note

• 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.

• In a promissory note there are two parties the maker of the note and the payee.

• The PN can be Demand Promissory Note or Usance Promissory Note.

• Demand Promissory Note has to be paid immediately on demand and Usance Promissory Note has to be paid after certain time period.

• In a promissory note there is a promise to make the payment whereas in a bill of exchange there is an order for making the payment.

• Also, a promissory note requires no acceptance as it is signed by the person who is liable to pay. The drawer of a bill of exchange is generally the creditor of the drawee and therefore it must be accepted by the drawee before it can be presented for payment.