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  • Promissory Notes
  • 13/11/2014 Make a Comment
  • Contributed by: Mick ( 1 article in 2014 )
What is a Promissory Note?

A Promissory Note is a written, signed and dated two-party negotiable instrument containing an unconditional promise by the maker (or obligor, payor, promisor) to pay a definite sum of money to a payee (or promisee, holder) on demand or at a specified future date.

It is often used as a means to borrow funds or take out a loan. So it's basically a promise to pay a certain amount of money to someone, on demand, or at a specified time.

The only difference between a promissory note and a bill of exchange is that the maker of a note pays the payee personally, rather than ordering a third party to do so.

Do Banks legally HAVE to accept Promissory Notes?

Use Bills of Exchange Act UK (1882) as Australia is still a UK colony if one accepts the view that the Commonwealth Constitution Act 1900 is void, hence so would be the Australia Bills of Exchange Act (1909).

Lord Denning says Promissory Notes MUST be treated as cash!

Case Law:

A Lord Denning judgement that says a bill of exchange once tendered has to be treated as cash... The principle is that a bill, cheque or note is given and taken in payment as so much cash, and not as merely given a right of action for the creditor to litigate a counter-claim (see Jackson v Murphy [1887] 4 T.L.R. 92). "We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to be honoured unless there is some good reason to the contrary"

(see per Lord Denning M.R. in Fielding & Platt Ltd v Selim Najjar [1969] 1 W.L.R. 357 at 361; [1969] 2 All E.R. 150 at 152, CA)


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