Which is not correct about the promissory note?
Asked by: Sandy Swaniawski | Last update: April 3, 2026Score: 4.3/5 (41 votes)
The incorrect statement about a promissory note is often that it's not a negotiable instrument, or that the promise to pay is conditional, or that it requires an acceptor, as promissory notes are written, unconditional promises to pay a fixed sum, are transferable (negotiable), and involve a maker (borrower) and payee (lender) without needing a third-party acceptor.
What is not correct about the promissory note?
The correct option is c: The incorrect statement is a promissory note is not a negotiable instrument. A promissory note is a promise made by the maker of the note to pay to the payee on a specific date or when demanded by the payee. These instruments are transferred and used as cash.
Which of the following is not true regarding a promissory note?
Which of the following is not true regarding a promissory note? Promissory notes may not be transferred to another party by endorsement.
Which is true about a promissory note?
Among the given options, the true statement about a promissory note is that it makes the borrower personally liable for the debt. A promissory note is essentially a written promise to pay a specified sum of money to a certain person or the bearer of the note at a designated time or on demand.
Which statement is false regarding a promissory note?
Explanation. The false statement regarding a promissory note is d) It is the term used for a note that is guaranteed or insured by a governmental agency. A promissory note is a written agreement that outlines the terms and conditions of a loan, including the borrower's promise to repay the loan.
Banks don't lend money. They buy your promissory note. (transcript in notes)
What makes a promissory note invalid?
A promissory note becomes invalid if it lacks essential elements like clear terms (amount, schedule, parties) or signatures (especially the borrower's), contains illegal clauses, involves fraud or duress, lacks "consideration" (exchange of value), or if terms are altered without mutual consent, making it unenforceable in court. Key invalidating factors include missing signatures, ambiguity, unlawful interest rates, lack of legal capacity, or changes made without agreement.
Which of the following is the correct 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. '
Which best describes a promissory note?
A promissory note is a legal document that states the borrower is indebted to the lender and promises to pay their mortgage back in full (including the principal and interest) by a specified date. Promissory notes describe exactly what you're agreeing to and provide you with details regarding your loan.
What are the key elements of a promissory note?
Key Elements of a Promissory Note Agreement
- Principal Amount. This is the initial sum of money loaned. ...
- Interest Rate. The interest rate is the cost of borrowing money, expressed as a percentage of the principal. ...
- Repayment Schedule. ...
- Late Payment and Default Provisions. ...
- Collateral.
Which of the following is a true statement about when a promissory note is sold?
Based on the analysis, the correct statement is: 'The seller records a debit to Cash and a credit to Notes Receivable. ' This reflects the proper accounting treatment for the sale of a promissory note.
Which of the following is a valid promissory note?
What makes a promissory note legal? A promissory note must include the date of the loan, the loan amount, the names of both the lender and borrower, the interest rate on the loan, and the timeline for repayment. Once the document is signed by both parties, it becomes a legally binding contract.
What is the default clause of a promissory note?
A promissory note may include a default on secured debt as part of the agreement. This means that if the borrower fails to pay under the agreed-upon terms of the promissory note, then the lender can take the secured debt as a form of payment.
What are the disadvantages of promissory notes?
Some possible disadvantages are: You will likely pay a higher interest rate than for a secured loan. If you are using a promissory note because you don't have a good credit rating, you will likely pay a higher interest rate than if you obtained a commercial business loan from a bank or other institution.
What must a promissory note be in writing?
A Promissory Note is an instrument in writing (not being a bank note or 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.
What is not true about a cheque?
(i) As a medium of exchange, a cheque has general acceptability. This is incorrect. A cheque is not a medium of exchange like cash or currency notes. It is an order to a bank to pay a certain amount from the drawer's account to the payee.
What is a promissory note Quizlet?
Promissory note. a written and signed promise to pay a sum of money at a specified time. note payable. how a promissory note is entered into the books of the one who owes money.
Which is not an essential feature of a promissory note?
Essential elements
An instrument to be a promissory note must possess the following elements: (1) It must be in writing: A mere verbal promise to pay is not a promissory note. (2) It must contain an express promise to pay: There must be an express undertaking to pay. A mere acknowledgment of debt is not enough.
What are the 5 elements of promissory estoppel?
In analyzing the application of section 90, the Washington courts have established five requirements for recovery in promissory estoppel: “(1) a promise which (2) the promisor should reasonably expect to cause the promisee to change position and (3) which does cause the promisee to change position (4) justifiably ...
Which of the following is included in a promissory note?
A promissory note is a written statement by one party agreeing to pay another party a sum of money. These notes contain terms pertaining to the debt, including the principal amount, interest rate, and payment schedule.
What is true of a promissory note?
A promissory note is a legally binding document in which the borrower agrees to repay the loan and any accrued interest and fees. The document also explains the terms and conditions of the loan.
What are the two types of promissory notes?
There are two types of promissory notes often used to evidence a loan or debt. One type is referred to as “demand” promissory note because the note is payable at any time on demand by the lender. The other type is “with distinguishing characteristics.” A demand note is theoretically due from the moment it is executed.
What information is found on a promissory note?
Promissory notes contain the principal amount (amount borrowed), interest rate, repayment schedule, late payment and default provisions, and collateral, which a lender can seize if the borrower defaults.
What is a promissory note example?
For example, a company may issue a promissory note to an investor in exchange for an investment. The promissory note will specify the amount of money that the company has borrowed, the interest rate on the loan, and the date by which the loan must be repaid.
Which of the following is a 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.
What makes a promissory note legal?
For a promissory note to be valid, it must clearly outline the loan amount, repayment schedule, interest rate (if any), and the names and signatures of both borrower and lender. It may also include default provisions, late fees, or collateral terms if the loan is secured by property.