Promissory Note

A promissory note is the simplest of the three negotiable instruments because it involves only two parties and a single, direct promise.

Definition (Section 4). Section 4 defines a promissory note as an instrument in writing 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.

Breaking this definition into its essential elements:

1. In writing. A promissory note cannot be oral; it must be reduced to writing.
2. Unconditional undertaking. The promise to pay must not depend on any condition. 'I promise to pay Ravi ₹20,000 if he completes the contracted work' is not a valid promissory note, because payment is conditional; 'I promise to pay Ravi ₹20,000 on 1st June 2026' is valid, because a promise to pay on a fixed or determinable future date is still treated as unconditional.
3. Signed by the maker. The person making the promise (the 'maker') must sign the instrument; an unsigned draft is not a promissory note.
4. Certain sum of money. The amount must be fixed and certain — not 'whatever is found due after the accounts are settled'.
5. Payable to a certain person, or to their order, or to bearer. The payee must be identifiable, or the instrument must be payable to bearer.
6. Cannot be made payable to the maker. Since a promissory note involves only the maker's own promise, the maker and the payee cannot be one and the same person — logically, a person cannot promise to pay themselves.

Parties to a promissory note

• Maker — the person who makes the promise and signs the note; the debtor.
• Payee — the person to whom, or to whose order, the sum is payable; the creditor. …