Bill of Exchange Act (1882) - United Kingdom
"A Bill of Exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer"
A promissory note?
Section 87(1) of the Bills of Exchange Act contains the following definition of a ‘promissory note’:
‘A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, and engaging to pay on demand or at a fixed or determinable future time, a sum certain in money, to a specified person or his order, or to bearer.’
There is no definition of ‘negotiable instrument’ in the Bills of Exchange Act. However, it is not disputed that a promissory note is a negotiable instrument.
All of the provisions of the Bills of Exchange Act apply to promissory notes, save for the sections mentioned in s 93(3) of the Act.
As negotiable instruments, they will fall within the prescription period specified in s 11(c) of the Prescription Act.
The elements identified in the above definition are important for recognising a promissory note, and for drafting one. The definition of a promissory note is substantially similar to that of a bill of exchange and the case law on the above elements may be of assistance when drafting a promissory note.
What then constitutes the elements that determine what is required for a document to qualify as a promissory note?
These are discussed below.
• Unconditional: In order for a note to be negotiable, it must be unconditional. A condition is a term that makes an obligation to perform dependent on whether or not an uncertain future event happens (Dale Hutchinson (ed) The Law of Contract in South Africa (Cape Town: Oxford University Press South Africa Pty Ltd, 2009) at 448). For examples of where a note will be...