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Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?
- a)Promissory note
- b)Bill of exchange
- c)Cheque
- d)Bank draft
Correct answer is option 'A'. Can you explain this answer?
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Which type of negotiable instrument is a written promise to pay a cert...
Promissory note:
A promissory note is a type of negotiable instrument that is a written promise to pay a certain sum of money by a pre-decided date. It is a legally binding document that outlines the terms and conditions of the loan or debt and serves as evidence of the borrower's promise to repay the lender.
Characteristics of a promissory note:
- Unconditional promise: A promissory note contains an unconditional promise to pay a specific amount of money. The promise to pay must be absolute and not dependent on any conditions or contingencies.
- Written instrument: A promissory note must be in writing and signed by the borrower (the maker) to be legally enforceable. Oral promises to pay a debt do not qualify as promissory notes.
- Fixed sum of money: The promissory note specifies the exact amount of money that is owed by the borrower to the lender. This amount is usually mentioned in both words and figures to avoid any confusion or disputes.
- Due date: The promissory note also includes a predetermined date on which the payment is due. This date is known as the maturity date and represents the deadline for the borrower to repay the debt.
- Interest rate (optional): While it is not mandatory, a promissory note may include an agreed-upon interest rate that the borrower must pay in addition to the principal amount borrowed. This ensures that the lender receives compensation for the use of their money.
- Parties involved: A promissory note involves two parties - the borrower (maker) who promises to pay, and the lender (payee) who is entitled to receive the payment.
Usage of promissory notes:
Promissory notes are commonly used in various financial transactions, including:
1. Business loans: Entrepreneurs and business owners often use promissory notes to borrow money for their enterprises.
2. Personal loans: Individuals may enter into promissory note agreements when borrowing money from family, friends, or other individuals.
3. Real estate transactions: Promissory notes are frequently used in real estate transactions when the buyer borrows money from the seller to finance the purchase.
4. Financing agreements: Promissory notes are also utilized in financing agreements between companies, allowing one party to lend funds to the other.
Legal enforceability:
Promissory notes are legally enforceable documents, and if the borrower fails to repay the debt as agreed, the lender can take legal action to recover the outstanding amount. The lender can file a lawsuit and obtain a judgment against the borrower, which can lead to various remedies such as wage garnishment, asset seizure, or property liens.
Conclusion:
A promissory note is a written instrument that represents a borrower's promise to repay a debt to a lender by a specific date. It is a legally binding document that outlines the terms and conditions of the loan, including the principal amount, interest rate (if applicable), and maturity date. Promissory notes are widely used in various financial transactions and have legal enforceability, allowing lenders to take legal action in case of non-payment.
A promissory note is a type of negotiable instrument that is a written promise to pay a certain sum of money by a pre-decided date. It is a legally binding document that outlines the terms and conditions of the loan or debt and serves as evidence of the borrower's promise to repay the lender.
Characteristics of a promissory note:
- Unconditional promise: A promissory note contains an unconditional promise to pay a specific amount of money. The promise to pay must be absolute and not dependent on any conditions or contingencies.
- Written instrument: A promissory note must be in writing and signed by the borrower (the maker) to be legally enforceable. Oral promises to pay a debt do not qualify as promissory notes.
- Fixed sum of money: The promissory note specifies the exact amount of money that is owed by the borrower to the lender. This amount is usually mentioned in both words and figures to avoid any confusion or disputes.
- Due date: The promissory note also includes a predetermined date on which the payment is due. This date is known as the maturity date and represents the deadline for the borrower to repay the debt.
- Interest rate (optional): While it is not mandatory, a promissory note may include an agreed-upon interest rate that the borrower must pay in addition to the principal amount borrowed. This ensures that the lender receives compensation for the use of their money.
- Parties involved: A promissory note involves two parties - the borrower (maker) who promises to pay, and the lender (payee) who is entitled to receive the payment.
Usage of promissory notes:
Promissory notes are commonly used in various financial transactions, including:
1. Business loans: Entrepreneurs and business owners often use promissory notes to borrow money for their enterprises.
2. Personal loans: Individuals may enter into promissory note agreements when borrowing money from family, friends, or other individuals.
3. Real estate transactions: Promissory notes are frequently used in real estate transactions when the buyer borrows money from the seller to finance the purchase.
4. Financing agreements: Promissory notes are also utilized in financing agreements between companies, allowing one party to lend funds to the other.
Legal enforceability:
Promissory notes are legally enforceable documents, and if the borrower fails to repay the debt as agreed, the lender can take legal action to recover the outstanding amount. The lender can file a lawsuit and obtain a judgment against the borrower, which can lead to various remedies such as wage garnishment, asset seizure, or property liens.
Conclusion:
A promissory note is a written instrument that represents a borrower's promise to repay a debt to a lender by a specific date. It is a legally binding document that outlines the terms and conditions of the loan, including the principal amount, interest rate (if applicable), and maturity date. Promissory notes are widely used in various financial transactions and have legal enforceability, allowing lenders to take legal action in case of non-payment.
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Which type of negotiable instrument is a written promise to pay a cert...
A promissory note is a type of negotiable instrument that is a written promise to pay a certain sum of money by a pre-decided date. It is a legally binding document in which one party, known as the maker, promises to pay a certain amount of money to another party, known as the payee, on a specified date or on demand.For example, if a person borrows money from a friend and signs a document stating that they will repay the borrowed amount within a certain time period, it is considered a promissory note.
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Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?a)Promissory noteb)Bill of exchangec)Chequed)Bank draftCorrect answer is option 'A'. Can you explain this answer?
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Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?a)Promissory noteb)Bill of exchangec)Chequed)Bank draftCorrect answer is option 'A'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?a)Promissory noteb)Bill of exchangec)Chequed)Bank draftCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?a)Promissory noteb)Bill of exchangec)Chequed)Bank draftCorrect answer is option 'A'. Can you explain this answer?.
Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?a)Promissory noteb)Bill of exchangec)Chequed)Bank draftCorrect answer is option 'A'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?a)Promissory noteb)Bill of exchangec)Chequed)Bank draftCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which type of negotiable instrument is a written promise to pay a certain sum of money by a pre-decided date?a)Promissory noteb)Bill of exchangec)Chequed)Bank draftCorrect answer is option 'A'. Can you explain this answer?.
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