11 Essential Elements of a “Promissory Note” (With Specimen)

“A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to order of a certain person, or to the bearer of the instrument.”

The person who makes the promise to pay is called the Maker. He is the debtor and must sign the instrument. The person who will get the money (the creditor) is called Payee.

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Essential Elements:


From the definition given in the Act it is apparent that the following essential requirements must be fulfilled by an instrument intended to be a promissory note:

1. The instrument must be in writing.

2. The instrument must be signed by the maker of it. A signature in pencil or by a rubber stamp of facsimile is good. An illiterate person may use a mark or cross instead of writing out his name. The signature or mark may be placed anywhere on the instrument, not necessarily at the bottom. It may be at the top or at the back of the instrument.

3. The instrument must contain a promise to pay. The promise to pay must be express. It cannot be implied or inferred. A mere acknowledgement of indebtedness is not enough.


Example: “Mr. Sen I. O. U. Rs. 1000”. Here I. O. U. stands for, “I owe you.” This is only an admission of indebtedness. There is no promise to pay and therefore the instrument is not a promissory note.

4. The promise to pay must be unconditional. If the promise to pay is coupled with a condition it is not a promissory note.


(i) “I Promise to pay B Rs. 1500 first deducting there out any money which he may owe me.”


(ii) “I promise to pay B Rs. 1500 on D’s death provided D leaves me enough to pay this sum.”

(iii) “I promise to pay B Rs. 1500, seven days after JD’s marriage.” These instruments are not promissory notes because the promise to pay is coupled with a condition. “I promise to pay B Rs. 500 on demand” is a note with an unconditional promise.

Stipulations of the following type are not regarded as conditions: promise to pay at a specified time or at a specified place or after the occurrence of an event which is certain to occur, or payment after calculating interest at a certain rate.


“I promise to pay B Rs. 1500 on 1st April, 2000.” “I promise to pay B Rs. 1500 on demand at Bombay.” “I promise to pay B Rs. 500 seven days after the death of C.” These are all valid promissory notes.

5. The maker of the instrument must be certain and definite.

6. A Promissory note must be stamped according to the Indian Stamp Act.

7. The sum of money to be paid must be certain.


(i) “I promise to pay B Rs. 1500 and all other sums which shall be due to him.”

(ii) “I promise to pay some money on the occasion of his marriage.” The above instruments are not promissory notes because the sum of money to be paid is uncertain.

8. The payment must be in the legal tender currency of India. A promise to pay certain quantity of goods or a certain amount of foreign money is not a promissory note.

9. The money must be payable to a definite person or according to his order. A note is valid even if the payee is misnamed or is indicated by his official designation only. Evidence is admissible to show who the payee really is.


A document, if it otherwise satisfies the definition of promissory note, will not cease to be so merely because the words “to order” are absent in the document.

10. The promissory note may be payable on demand or after a certain definite period of time.

11. The Reserve Bank Act prohibits the creation of a promissory note payable on demand to the bearer of the note, except by the Reserve Bank and the Government of India.

Following is a Specimen of Promissory Notes:

An instrument is valid as a promissory note if it is so drafted as to satisfy the essential requirements of a promissory note. Subject to this condition the parties may use any form desired. Some typical forms are given below.

(i) “On demand I promise to pay A, B of No. 5, Beadon St., or order Rs. 1000 (Rupees one thousand only) with interest at 8 per cent per annum, for value received in cash.” Sd/A”. Y.

(Banks generally follow the type as indicated in item on (i) above).

Date ________

Address ________

(ii) “One year after date I promise to pay C D. or order Rs. 10000.”

Sd/X Y

Date ________

(iii) “On demand I promise to pay B or order Rs. 500.” —Sd/X Y.

(iv) “1 acknowledges me to be indebted to B in Rs. 1000 to be paid on demand, for value received.”

—Sd/X. Y.


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