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Text 5. PROMISSORY NOTES
A promissory note is an unconditional promise in writing made
by one person to another signed by the maker engaging to pay, on
demand or at a fixed or determinable future time, a sum certain in
money, to, or to the order of, a specified person or to bearer.
An instrument in the form of a note payable to maker's order is
not a note within the meaning of this section unless and until it is
indorsed by the maker.
The essential difference between a bill and a note is that the
former is an order to pay, whereas the latter is a promise to pay. Both
are negotiable instruments and most of the rules already discussed
with regard to bills also apply to notes.
Collateral Security
A promissory note given by a borrower of money is frequently
accompanied by additional security, such as the title of a house. Section
83 (3) provides that a note is not invalid by reason only that it contains
also a pledge of collateral security with authority to sell or dispose thereof.
Alternatively, a promissory note is sometimes given as collateral
security for a mortgage because the relatively speedy method of en-
forcement is attractive to the lender.
Maker
The principal debtor on the note is, naturally enough, the person
who gives the promise to pay, and he is known as the maker of the note.
Joint Makers
Section 85 provides that:
1. A promissory note may be made by two or more makers, and
they may be liable thereon jointly, or jointly and severally, accord-
ing to its tenor.
2. Where a note runs “I promise to pay” and is signed by two or
more persons, it is deemed to be their joint and several note.
Thus, if the note reads “we promise” and is signed by two or
more makers, their liability is joint only, which means that there is
only one debt and only one cause of action. If the note reads “I
promise”, it will be the joint and several note of the makers, with the
result that the holder can sue the makers all together or one by one,
and an unsatisfied judgment against one will not prevent an action
against the other. It will be appreciated that in either case a person who
signs the note as a maker will be liable to the holder for the full
amount of the note, and not merely for his share.
Text 5. PROMISSORY NOTES
A promissory note is an unconditional promise in writing made
by one person to another signed by the maker engaging to pay, on
demand or at a fixed or determinable future time, a sum certain in
money, to, or to the order of, a specified person or to bearer.
An instrument in the form of a note payable to maker's order is
not a note within the meaning of this section unless and until it is
indorsed by the maker.
The essential difference between a bill and a note is that the
former is an order to pay, whereas the latter is a promise to pay. Both
are negotiable instruments and most of the rules already discussed
with regard to bills also apply to notes.
Collateral Security
A promissory note given by a borrower of money is frequently
accompanied by additional security, such as the title of a house. Section
83 (3) provides that a note is not invalid by reason only that it contains
also a pledge of collateral security with authority to sell or dispose thereof.
Alternatively, a promissory note is sometimes given as collateral
security for a mortgage because the relatively speedy method of en-
forcement is attractive to the lender.
Maker
The principal debtor on the note is, naturally enough, the person
who gives the promise to pay, and he is known as the maker of the note.
Joint Makers
Section 85 provides that:
1. A promissory note may be made by two or more makers, and
they may be liable thereon jointly, or jointly and severally, accord-
ing to its tenor.
2. Where a note runs “I promise to pay” and is signed by two or
more persons, it is deemed to be their joint and several note.
Thus, if the note reads “we promise” and is signed by two or
more makers, their liability is joint only, which means that there is
only one debt and only one cause of action. If the note reads “I
promise”, it will be the joint and several note of the makers, with the
result that the holder can sue the makers all together or one by one,
and an unsatisfied judgment against one will not prevent an action
against the other. It will be appreciated that in either case a person who
signs the note as a maker will be liable to the holder for the full
amount of the note, and not merely for his share.
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