Q.Define Promissory Note under Section 4 of the Negotiable Instruments Act, 1881. Name the parties to a promissory note.

A promissory note (Section 4) is a two-party instrument: an unconditional written undertaking, signed by the maker, to pay a certain sum to a certain person or their order, or to bearer. Its only parties are the maker (the debtor, who promises to pay) and the payee (the creditor). A bill of exchange (Section 5) is structurally different: it is an unconditional written order, signed by its maker (the drawer), directing another named person (the drawee) to pay a certain sum to a certain person (the payee) or their order, or to bearer. A bill of exchange therefore usually has three parties — drawer, drawee and payee — and the drawee becomes primarily liable only after formally accepting the bill by signing it; before acceptance, only the drawer is bound.

The two instruments are compared on several practical points: a promissory note needs no acceptance since the maker's own promise is already binding, while a bill of exchange needs the drawee's acceptance; in a promissory note the maker and payee can never be the same person, while in a bill of exchange the drawer can validly draw the bill payable to their own order; and because a bill of exchange involves a drawer who is only secondarily liable, the law requires that the drawer (and any endorsers) be given notice if the bill is dishonoured, a requirement that does not arise for the maker of a promissory note. Both instruments are subject to the same rules on negotiation, days of grace at maturity, and consequences of dishonour.