Promissory Note

Promissory Notes

note  is a written promise to pay a specified sum at a certain time.

The person who promises is called the maker, and the person to whom he promises is called the payee.

The FACE  of a note is the sum of money promised.

negotiable note  is one which is made payable to the bearer, or to the order of the payee. A negotiable note can be sold or transferred.

A note is non-negotiable  when it is payable only to the person or persons named in the note.

An indorser  of a note is a person who writes his name on the back of it. The person who indorses, by so doing guarantees its payment. An indorsement in blank  is simply the signature of the indorser written across the back of the note or draft. When indorsed in this way the note or draft is made payable without further indorsement to any person holding.

A note or draft is indorsed in full  when the indorser states, over his signature, the person to whose order the note or draft is to be paid. If an indorser does not wish to guarantee the payment of a note or draft, he writes “Without recourse” over his name when indorsing it.

protest  of a negotiable note or draft is a formal statement by a notary public that said note or draft was presented for payment or acceptance and refused.

A note, when due, must be presented at the place at which it is made payable. The day of maturity  is the day on which a note becomes due.

The days of grace  are the three days beyond the specified time for payment. Days of grace are now practically abolished throughout the United States.

Kinds of Notes.—There are three principal kinds of notes—Time NotesJoint Notes, and Joint and Several Notes.

Time Note  must be paid in a specified time.

Joint Note  is one signed by two or more persons who are jointly liable for its payment.

Joint and Several Note  is a note signed by two or more persons who are both jointly and individually liable for its payment. Each man who signs the note is as much responsible for the payment of the whole sum as if he had signed alone.

Legal Rules that Apply to Notes

A note made out on Sunday  is void.

If a note does not state that interest  is to be paid, it does not bear interest until after it is due.

If anyone obtains a note by fraud  or from an intoxicated person, he cannot collect.

To be negotiable  an instrument must be in writing and signed by the maker (of a note) or drawer (of a bill or check).

It must contain  an unconditional promise or order to pay a certain sum in money.

Must be payable on demand, or at a fixed future time.

Must be payable to order or to bearer.

In a bill of exchange (check), the party directed to pay must be reasonably certain.

Every negotiable instrument is presumed to have been issued for a valuable consideration, and want of consideration in the creation of the instrument is not a defense against a bona-fide holder.

An instrument is negotiated, that is completely transferred, so as to vest title in the purchaser, if payable to bearer, or indorsed simply with the name of the last holder, by mere delivery; if payable to order, by the indorsement of the party to whom it is payable and delivery.

One who transfers an instrument by indorsement warrants to every subsequent holder that the instrument is genuine, that he has title to it, and that if not paid by the party primarily liable at maturity, he will pay it upon receiving due notice of non-payment.

To hold an indorser liable  the holder upon its non-payment at maturity must give prompt notice of such non-payment to the indorser and that the holder looks to the indorser for payment. Such notice should be sent within twenty-four hours.

When an indorser is thus compelled to pay  he may hold prior parties, through whom he received the instrument, liable to him by sending them prompt notice of non-payment upon receiving such notice from the holder.

One who transfers a negotiable instrument by delivery, without indorsing it, simply warrants that the instrument is genuine, that he has title to it, and knows of no defense to it, but does not agree to pay it if unpaid at maturity.

The maker of a note is liable  to pay it, if unpaid at maturity, without any notice from the holder or indorser.

Notice to one of several partners is sufficient notice to all.

When a check is certified  by a bank the bank becomes primarily liable to pay it without notice of its non-payment, and when the holder of a check thus obtains its certification by the bank, the drawer of the check and previous indorsers are released from liability, and the holder looks to the bank for payment.

A bona-fide holder  of a negotiable instrument, that is, a party who takes an instrument regular on its face, before its maturity, pays value for it and has no knowledge of any defenses to it, is entitled to hold the party primarily liable responsible for its payment, despite any defenses he may have against the party to whom he gave it, except such as rendered the instrument void in its inception. Thus, if the maker of a note received no value for it, or was induced to issue it through fraud or imposition, that does not defeat the right of a bona-fide holder to compel its payment from him.

The dates and amounts of partial payments  on a note, before it is finally paid in full, are placed on the back.

The place of payment, if not mentioned, is at the maker's place of business or residence, during reasonable business hours.

If a note  or a check  received in payment of a debt is dishonored, the debt revives.

Ignorance  of the law does not excuse anyone. No contract  is good unless there be a consideration. No consideration is good that is illegal.

The maker  of an accommodation note  is not bound to the person accommodated; but he is bound to any other person receiving the note for value.