A promissory note is an instrument in writing (not a banknote or currency note) that contains an unconditional undertaking, signed by the maker, to pay a certain sum of money only to a certain person or entity. A promissory note is an unconditional promise in writing made by one person to another, stating that they will pay a specific sum of money on demand or after a specific period or at a specific future date.Promissory Note: Definition
Promissory Note: Explanation
Specimen/Format of Promissory Note
Features of Promissory Note
Difference between Promissory Note and Bill of Exchange
Promissory Note FAQs
A promissory note is an unconditional written promise to pay a specific sum of money to a certain person or entity.
The features of a promissory note include that it must be in writing, it must be signed by the maker, it is a promise to pay, the promise to pay must be unconditional, the amount payable must be certain, and the amount must be expressed in terms of money only.
The key difference between a promissory note and a Bill Of Exchange is that the maker of a promissory note is required to pay the amount of the instrument while, in contrast, the drawer of a Bill Of Exchange is only required to accept the payment. Another key difference is that notice of dishonor for a promissory note isn't compulsory whereas it's compulsory for bills of exchange (particularly foreign ones).
A promissory note must be in writing and signed by the maker. There are no technical requirements for a promissory note. The amount payable must be certain or capable of being made certain either by computation or reference to some document which specifies it. A promissory note must be payable on demand or after a certain period.
Unconditional: an unconditional promise in writing made by one person to another that they will pay that amount of money only upon receipt of the instrument at some future date or time. Conditional: a promise to pay which is dependent on the occurrence of a particular event or set of circumstances. For example, a note might be made payable only if the maker's business prospers.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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