What is a promissory note?
A promissory note is a type of security. It is a security for the contract concluded between the parties. It is most often used to increase the security of professional contracts. It guarantees the timely payment of the liability by the issuer of the document or a person designated by him.
Bill of exchange - when do we use it?
A promissory note can be used as a means of payment (credit), security or circulation. The payment function of a bill of exchange means the possibility of taking a credit or a loan through it. The security function binds
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with the necessity to settle the contracted liability in the previously agreed amount and time. Circulation, on the other hand, gives the opportunity to pay the amount due to another person with the bill of exchange just held and - thus - transferring the debtor's existing obligations to it. It is worth knowing that a promissory note definitely facilitates the court enforcement of receivables, but may turn out to be worthless if the debtor turns out to be insolvent.
What to do to make the promissory note valid?
To be legally valid, the promissory note must be in writing and contain the name (the word of the promissory note written in the same language as the entire document), payment date, place of payment, unconditional promise to pay the specified amount of money, name of the person to whom the payment is to be made and the date and place of issue.The promissory note must be signed by the issuer himself. Failure to comply with any of the above elements may result in the document being considered invalid.
Who signs the promissory note?
A promissory note issued by a legal person is signed by an authorized representative, for example the president of the management board. Additionally, such a security must bear the company's stamp. In the case of a civil law partnership, the promissory note is signed by all partners if they are to pay off their liabilities together, or only specific persons, if the obligation does not apply to all partners. Despite the fact that in a civil law partnership all members are responsible for its obligations, only the persons who signed it are responsible for the signed promissory note.
Bill of exchange - what types are there?
Depending on the debtor, a promissory note is either own (sola) or drawn (drawn). In the first type, the promissory note issuer undertakes to pay the amount specified in the document. A drawn bill of exchange is characterized by an indication by the issuer of a person (drawer) who is to pay its amount due to the indicated contractor (remitter). Start a free 30-day trial period with no strings attached!
The law also allows for the issuance of a blank promissory note. A security with an undeclared transaction amount or settlement date secures the interests of the loan or credit facility. Its advantage is that, unlike a deposit, it does not freeze any cash. It is in the interest of the issuer of a blank promissory note to prepare a promissory note declaration in which the parties jointly determine what factors may trigger the debtor's payment request and the maximum amount that may be entered on it. Although the owner of the promissory note may fill in the promissory note contrary to the contract, he will certainly lose the case in court in the near future and will have to return the unduly collected money with interest to the former debtor.
