Page 111 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes (iii) “I promise to pay B ` 500 and all other sums which shall be due to him.”

(iv) “I promise to pay B ` 500, first deducting thereout any money which he may owe me.”

(v) “I promise to pay B ` 1500 on D’s death, provided he leaves me enough to pay that sum.”
(vi) “I promise to pay B ` 500 seven days after my marriage with C.”
(vii) “I promise to pay B ` 500 and to deliver to him my white Maruti Car 1 January next.”

Example: A promises to pay B ` 500 provided C leaves sufficient money in favour of A

after C’s death. It is not a promissory note.

Note Specimen of a Promissory Note
` 10,000 New Delhi – 1100 01
Jan. 10, 2006

On demand [or six months after date] I promise to pay X or order the sum of rupees ten
thousand with interest at 12 per cent per annum only for value received.
To X Sd/-A

Address……………. Stamp

Parties to a Promissory Note

1. The maker – the person who makes the note promising to pay the amount stated therein.

2. The payee – the person to whom the amount of the note is payable.
3. The holder – is either the original payee or any other person in whose favour the note has
been endorsed.
4. The endorser – the person who endorses the note in favour of another person.

5. The endorsee – the person in whose favour the note is negotiated by indorsement.

Task Are the following instruments duly signed by A promissory notes? (i) “I am liable
to X to a sum of ` 1000 which is to the paid in instalments for rent” (ii) “I acknowledge
myself to be indebted to X by ` 500 to be paid on demand for value received”.
(iii) “I promise to pay ` 5000 and give a Maruti Car to P.” [Hint: (i) It is only an admission
of liability and does not involve any promise to constitute a promissory note (s.4). (ii) It is
a promissory note. (iii) A promissory note must contain a promise to pay a certain sum of
money only. Therefore, it is not a promissory note.]

6.3.2 Bill of Exchange

A ‘bill of exchange’ is defined by Sec.5 as ‘an instrument in writing, containing an unconditional
order, signed by the maker, directing a certain person to pay a certain sum of money only to or
to the order of, a certain person, or to the bearer of the instrument’.

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