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Bill of Exchange
1. Introduction:
Promissory note and bill of exchange are negotiable instruments. The negotiable
instrument recognizes only three instrument viz., a promissory note, bill of
exchange and a cheque. The essentials of the both the instruments are to great extent
are same. Sometimes a bill of exchange is called a draft.
2. Definition of promissory note:
According to Sec 4 of the negotiable instrument act "A promissory note is an instrument
in writing (not being a bank note or currency note) containing an unconditional
undertaking, signed by the maker to pay on demand or at a fixed or determinable future
time a certain sum of money only to or by the order of a certain person or to
the bearer of the instrument.
3. Essentials of a promissory note:
Following are the essentials of a promissory note.
(i) Written:
Promissory note must be in written form. A verbal promise to pay does not become a
promissory note.
(ii) It must contain promise to pay:
There must be a promise or an undertaking to pay. A mere acknowledgment of debt is
not a promissory note.
(iii) Unconditional promise:
It must contain an unconditional promise to pay. The promise to pay must not depend
upon the happening of some uncertain event or condition.
(iv) Signature of maker:
The maker must singed the promissory note.
(v) Maker must be a certain person:
The promissory note must indicate who is the person taking responsibility to pay the
amount.
(vi) The payee must be certain:
The payee of promissory note must also a certain person.
(vii) The sum payable must also be certain:
The sum payable must also be certain and definite.
(viii) The sum payable must be in Pakistani currency:
The sum of money payable must be in Pakistani currency. A promissory note containing
a promise to pay a certain amount in foreign currency is not a valid promissory note.
(ix) Other legal formalities:
(i) Consideration must be lawful.
(ii) It should be dated.
(iii) It must be properly stamped.
(iv) a Place should be mentioned where it is made.