TeachMeFinance.com - explain promissory note
promissory note -- a written promise to pay a stipulated sum of money to a specified party under conditions mutually agreed upon. Also called a note, promise, or bond.
Promissory note -- A written engagement by one person to pay unconditionally to another therein named (or to his order or to the bearer) a certain sum of money at a specified time. A note bears interest before maturity only when so stated. "Value received" is usually written in a note but is not necessary; if not written it is presumed by the law to be or the deficiency may be supplied by proof. If the amount stated in words and the amount stated in figures do not agree the words govern. A note given without consideration cannot be enforced by a holder having knowledge of that fact, but a note given without consideration may be enforced by a person not having a knowledge of that fact who purchased it for a consideration. If the holder of a note fails to present it for payment promptly at maturity the maker is not thereby discharged from his liability. If the note was payable at a specified place and the maker was there at the date when due prepared to pay it this amounted to a legal tender of payment and 'the maker cannot thereafter be charged with interest as being in default. But the principal of the note he is still legally bound to pay. If there are other persons who are only secondarily liable upon the paper, (indorsers or others who have undertaken to pay it if it is promptly presented to the person primarily liable upon it, that is, the maker, and by him dishonored) they will be released if prompt presentation be not made to the original party, that is, the maker. But the obligation of the latter is absolute and not dependent upon any such condition as prompt presentation. When a note is payable at a bank or any other specified place it is the duty of the holder to present it at the bank or place promptly on the day when it becomes due. The holder is liable for any loss resulting from the failure to make due presentation. But if there is no loss there is no liability. When a creditor consents to take in payment of a debt a bill or note payable at a future day this act constitutes an agreement for delay. The debt is not extinguished, but the creditor cannot begin an action upon it until the bill or note falls due and default in payment is made. In the case of a note made in one state and payable in another state any question as to its legality must be tested in the state where it is payable. Interest is chargeable at the legal rate in the state where the note is payable. If a note is lost or stolen the maker is not released from payment ; he must pay it if the consideration for which it was given and the amount can be proved. When a note is discounted by a bank with which the maker has an account the amount of the note must be charged against the account otherwise the indorsers, if there be any, are released from responsibility. If A buys of B on credit and it is not specified that a note shall be given for the indebtedness the buyer cannot be compelled to give a note unless there is a custom of the trade to that effect or unless the previous course of dealing between the two has been such as to imply an agreement that a note should be executed to cover the indebtedness. For additional information see Collateral note ; also see Negotiable instrument.
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