What are promissory notes ?
A promissory note is a writing by which a person called the subscriber (the debtor, i.e., the customer) acknowledges his debt and agrees to pay another person called the beneficiary (the creditor, i.e., the supplier, or a third party designated by him) a certain amount by a certain date.
The subscriber of a promissory note is obligated in the same manner as the acceptor of a bill of exchange.
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Insofar as they are not incompatible with the nature of the promissory note, the provisions relating to the bill of exchange and concerning maturity, domiciliation, provision, endorsement, stamp, joint and several liability, payment, recourse in the event of non-payment, protest and limitation period shall apply to the promissory note.
Unlike the bill of exchange, which is always a commercial act, the promissory note can be a civil or commercial act, depending on the case.
There are also elevated notes that were created for the same purpose as the elevated bill of exchange.
Once subscribed, the beneficiary delivers them to his bank and they undergo the same processing procedure as the LCR. Paper does not circulate; transactions can be processed by computer.
How can I issue a promissory note?
The promissory note is issued by the person who owes money, the debtor, to settle a business debt: it can be to pay a supplier, for example.
To pay with a promissory note, you must fill in the bank details of your beneficiary in your RIB (Relevé d'Identité Bancaire), indicate the agreed payment date and then sign the promissory note at the bottom right.
A promissory note is a promise to pay a certain amount on the agreed upon date, the "due date" mentioned in the document.
In the absence of a date, the note is payable "at sight", that is, you agree to pay your provider as soon as the note is delivered for collection.
Funds may be available in your bank account until the maturity date indicated on the note. That's the difference with a check, which requires immediate funding as soon as it is issued.
You then deliver this promissory note to your bank, which will execute it in the same way as a transfer in favor of the nominee, respecting the mentioned expiration date.
The promissory note: definition and characteristics -
A promissory note is a writing in which a customer, the "subscriber" (also called the drawer), agrees to pay an amount at a certain time to his provider, the payee.
Unlike the bill of exchange, it is not the creditor who takes the initiative to issue the bill of exchange, but the debtor (or the drawee). Promissory notes are used much less than bills of exchange.
A promissory note has the characteristics of both a bill of exchange (a firm commitment to pay an amount on a given due date) and a check (the debtor issues the note and gives it to the creditor).
However, unlike a check, a promissory note allows you to finance the debtor's account until the due date, while a check requires financing on the date of issue.
Required information
Like the bill of exchange, the promissory note must contain the following statements:
- The name of the promissory note inserted in the title itself and expressed in the language used to write the title.
- The pure and simple promise (therefore unconditional) to pay a certain amount. It is customary to indicate them in numbers and letters. If the two sums are different, the sum in words is taken into account. If the sum is indicated several times in numbers or letters, the lower sum is taken into account.
- The maturity of the promissory note, i.e., the date on which it must be paid;
- The place where payment should be made is usually the subscriber's address;
- The date and place where the letter was created;
- The name of the person to whom or to whose order payment is to be made;
- And finally the signature, by hand or by any non handwritten process, of the person who issues the title (the subscriber).
The omission of the due date of the declarations, the place of payment and the place of creation does not affect the validity of the promissory note.
The subscriber's RIB is not a mandatory indication. It appears systematically on commercial invoices today because companies collect them through their banks. It is not required by law.
A company may very well decide to present itself to the subscriber for payment on the due date.
But beware, the law does not allow the use of cash under certain conditions. Therefore, you will have to make sure that all legal requirements are met if you decide not to go through a bank to collect the bill.
Maturity of the promissory note
Like a bill of exchange, a promissory note may be payable under one of the following maturity conditions:
- On a fixed date (also known as a given date): the exact date of payment is indicated (Example: April 30, 2014)
- On a given date: it is payable on a fixed date from its creation. A date of 45 days means 45 days from the issuance of the bill of exchange. If the drawer issued the note on March 30, it will expire on May 15. Note: These are calendar days)
- At sight: the promissory note can be presented for payment at any time after its creation
- To a certain period of time: Although it is sometimes called the sight period for a promissory note, this concept does not really apply to it, since the promissory note is created by the debtor who agrees to pay. If there is a waiting period between the creation date and the due date, it is more appropriate to refer to it as a due date at a certain date of delay.
Downstream
The Beneficiary may request the guarantee of a third party to which he may have recourse in the event of the Subscriber's default at maturity.
A guarantee is a commitment by a third party to pay the note at maturity if the debtor fails to make payment. The issuer (or endorser or guarantor) signs the bill of exchange with the words "good for endorsement". This guarantee can be given for all or part of the amount of the note.
The disposition
The subsidy is the beneficiary's claim on the subscriber. It has nothing to do with the notion of a check-related subsidy.
A concession is said to exist if, at maturity of the note, the subscriber owes the beneficiary an amount at least equal to the amount of the note.
The permit must exist at the time of maturity, but does not have to exist at the time of issuance.
Support
Endorsing a promissory note means signing the back of the note and forwarding it to another beneficiary with the words "Pay to the order of...", but a simple signature without this information is sufficient.
The current holder of the note is the endorser. He signs it and gives it to a new holder, the endorser. With his signature, the endorser is bound by the note and is a guarantor of the note to the holder.
Note: The new bearer does not sign the note, but if the new bearer also wishes to transfer it, he will have to sign it as an endorser before giving it to the new bearer.
Payment of the promissory note
At maturity, the holder must present the bill of exchange for payment. Otherwise, he may lose his rights, in particular recourse in the event of non-payment.
A payable-on-demand note must be presented for payment within one year of its creation.
The promissory note payable on a fixed date or the demand must be submitted for payment on the same day or within 10 business days after it is due.
If the due date falls on a non-working day, then payment cannot be demanded until the next working day.
The delivery of the promissory note to the subscriber after payment constitutes proof of payment for the subscriber who is released from all liability.
In case of partial payment, the Holder will not deliver the Note to the subscriber, but will expect full payment of the amount due.
In the event of non-payment, all signatories on the note are responsible for payment. Full payment of the amount due may be claimed from any signatory. This is the principle of solidarity of the signatories.
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