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Promissory note - features & Kinds of Promissory note

INTRODUCTION: Promissory note is a credit instrument, which is used in business commonly; it is a written promise to pay a sum of money to the holder. In detail Promissory note is an unconditional promise by the borrower to return the borrowed money on a specified date to the lender. When it is drawn and signed by the borrower, it is handed over to lender as security. The bill of exchange Act 1882 defines promissory note as

DEFINITION: “It is a written promise made by one person to another person to pay a certain amount of money on demand at the determinate date”

SPECIMEN OF PROMISSORY NOTE

Promissory Note Payable on Demand Rs. 2000 Karachi

5th December 2001 On demand I promise to pay to Mr. Ahmed or order the sum of Rupees two thousand only for value received.

Stamp

(Signature of M. Wahid across the stamp)

FEATURES OF PROMISSORY NOTE According to the above definitions we find the following features of a promissory note, which are given below. 
WRITTEN PROMISE: Promissory note is a written promise not oral. \
UNCONDITIONAL: It is unconditional promise 
TRANSFERABLE: It can be transferred to other party. 
SIGNATURE: The maker must sign it.

PARTIES TO A PROMISSORY NOTE DRAWER: It is the person who borrows the money and makes the promise in the shape of a Promissory note, to pay back the borrowed money.

PAYER: It is the person who lends the money and for whom promissory notes had drawn. He is basically a creditor.



KINDS OF PROMISSORY NOTES 
SIGHT PROMISSORY NOTE: This note which becomes payable on sight. Whenever Drawee shows it, it will be paid at that moment. SPECIFIC TIME PERIOD PROMISSORY NOTE: This kinds of promissory note are drawn for a definite period of time and after that they are payable.

SINGLE PROMISSORY NOTE: When the promise to return the (borrowed) money made the promissory (maker) is only one person and makes only he liable to pay off the sum, such a note is known single promissory note. JOINT PROMISSORY NOTE: Where there are two or more promissory or makers of the note, such a written promise is known as joint promissory note. In it two or more persons are jointly or individually liable to pay off the borrowed sum.

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