Section 4 NI Act: "Promissory note"

Negotiable Instruments Act, 1881

Section 4 NI Act at a Glance

Section 4 NI Act defines a 'promissory note' as a signed written instrument (not being a bank-note or currency-note) containing an unconditional undertaking to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer.

Section 4 NI Act Bare Act Text

4. "Promissory note".

A “Promissory note” is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

Illustrations

A signs instruments in the following terms:

(a ) “I promise to pay B or order Rs. 500.”

(b) “I acknowledge myself to be indebted to B in Rs. 1,000, to be paid on demand, for value received.”

(c) “Mr. B, I O U Rs. 1,000.”

(d) “I promise to Pay B Rs. 500 and all other sums which shall be due to him.”

(e) “I promise to Pay B Rs. 500, first deducting thereout any money which he may owe me.”

(f) “I promise to Pay B Rs. 500 seven days after my marriage with C.”

(g) “I promise to Pay B Rs. 500 on D's death, provided D leaves me enough to pay that sum.”

(h) “I promise to Pay B Rs. 500 and to deliver to him my black horse on 1st January next.”

The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes.

Section 4 NI Act in Simple Words

Section 4 NI Act defines what constitutes a promissory note under the Negotiable Instruments Act, 1881. A promissory note is an instrument in writing (other than a bank-note or a currency-note) that contains an unconditional undertaking, signed by the maker, to pay a certain sum of money only to a certain person, or to the order of a certain person, or to the bearer of the instrument.

Section 4 NI Act provides eight illustrations, marked (a) to (h), of instruments signed by A. Only illustrations (a) and (b) are promissory notes: in illustration (a), A signs a written promise to pay B or order Rs. 500, and in illustration (b), A signs a written acknowledgment of being indebted to B in Rs. 1,000, to be paid on demand, for value received.

Section 4 NI Act states that illustrations (c) to (h) are not promissory notes: "Mr. B, I O U Rs. 1,000"; a promise to pay B Rs. 500 and all other sums which shall be due to B; a promise to pay B Rs. 500 after first deducting any money B may owe A; a promise to pay B Rs. 500 seven days after A's marriage with C; a promise to pay B Rs. 500 on D's death, provided D leaves A enough to pay that sum; and a promise to pay B Rs. 500 and to deliver A's black horse to B on 1st January next. The section gives the result for each and does not state the reason.

When Section 4 NI Act Applies

  • The instrument must be in writing.
  • The instrument must not be a bank-note or a currency-note.
  • The instrument must contain an unconditional undertaking to pay.
  • The undertaking must be to pay a certain sum of money only.
  • The instrument must be signed by the maker.
  • The sum of money must be payable to, or to the order of, a certain person, or to the bearer of the instrument.

Example of Section 4 NI Act

Joseph in Chandigarh writes and signs a document stating, 'I promise to pay Harpreet or order ₹50,000.' Later, Joseph also writes and signs a second document stating, 'I promise to pay Harpreet ₹50,000 seven days after my marriage with Sarita.' Under Section 4 NI Act, the first document is a promissory note because it is a signed written instrument containing an unconditional undertaking by the maker to pay a certain sum of money only to, or to the order of, a certain person, matching illustration (a). The second document is not a promissory note under Section 4 NI Act because it is in the form of illustration (f), which Section 4 NI Act says is not a promissory note.

FAQs on Section 4 NI Act

What is Section 4 NI Act?▼

Section 4 NI Act defines a promissory note as a written instrument (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. Section 4 NI Act also gives eight illustrations showing which signed writings qualify as promissory notes and which do not.

Is a written 'I O U' a promissory note under Section 4 NI Act?▼

No. Under illustration (c) to Section 4 NI Act, a signed instrument reading "Mr. B, I O U Rs. 1,000" is not a promissory note. By contrast, under illustration (b), a signed acknowledgment of being indebted to B in Rs. 1,000, to be paid on demand for value received, is a promissory note.

Are bank-notes or currency-notes promissory notes under Section 4 NI Act?▼

No. Section 4 NI Act expressly excludes a bank-note and a currency-note from the definition of a promissory note.

Is a promise to pay money along with delivering goods a promissory note under Section 4 NI Act?▼

No. Section 4 NI Act requires an undertaking to pay a certain sum of money only, and illustration (h) states that a promise to pay B Rs. 500 and to deliver a black horse is not a promissory note.

Is a promise to pay after a marriage, or on a death if enough money is left, a promissory note under Section 4 NI Act?▼

No. Illustrations (f) and (g) to Section 4 NI Act state that a promise to pay Rs. 500 seven days after the maker's marriage with C, and a promise to pay Rs. 500 on D's death provided D leaves the maker enough to pay that sum, are not promissory notes.

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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·