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A promissory note is an unconditional promise in writing made by one person (the maker) to pay another person (the bearer) on demand or at a fixed or determinable future time, a specified or certain sum of money to, or to the order of, the bearer. A promissory note can therefore be used by a lender to document a sum owed or payable to him or can be a useful and flexible tool to record a promise to pay back money. In addition, it is a good legal instrument for establishing a clear written record of a loan between individuals or entities, such as banks.

Promissory notes (together with bills of exchange, cheques, drafts and certificates of deposit) belong to a class of contracts known as negotiable instruments. Promissory notes provide benefits to lenders due to a requirement that essential terms are included such as loan amount, interest rate, payment and repayment terms, and maturity date in a relatively compact instrument. A promissory note is generally not as complex as a loan agreement and may be shorter and less detailed. Each type of negotiable instrument has specific formalities that must be met in order to be valid and legally enforceable.

Challenges to promissory notes

 If there is a breach of the terms of a promissory note by the maker, the bearer can seek to enforce the note by filing a claim in Court. The bearer would need to demonstrate to the Court that that there is a valid promissory note signed by the maker, that there is a balance due on the note, and that there was a demand for payment made on the maker that has not been honoured, so leaving the maker in default. There is a presumption that bills of exchange and promissory notes, unlike other forms of simple contract, have been given in exchange for valuable consideration, and that the bearer has good title. The effect of the presumption is to shift the burden of proof from the bearer, who relies upon the instrument, to the maker who impugns it.  In this regard, if there is a challenge to the validity or enforceability of a promissory note, the defences are usually limited.

When a bearer seeks to enforce a promissory note in a Court of law, the defences available on a claim on a bill of exchange or promissory note can include fraud (brought about by duress or otherwise) or absence of consideration.  Consideration is typically anything of value promised to another when making a promissory note.  Valuable consideration has been defined as some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other at his request.

The ground upon which a contract (including a promissory note) is voidable for duress is the same as in the case of fraud, and is that, whether it springs from a fear or a belief, the party has been subjected to an improper motive for action. Duress invalidates every contract into which it enters, and, an instrument, the consideration for which is brought on by duress, is voidable at the option of the party defrauded (except against a third party holder of a promissory note given in return for something of value, who has no knowledge of any defects or contradictory claims to its payment). At common law, duress usually means the compulsion under which a person acts through fear of personal suffering as from injury to the body or from confinement, actual or threatened. It is first for the maker to prove the existence of duress at the time of the making of the contract. It is then for the bearer to prove that his threat has contributed nothing to the maker’s decision to enter into the contract.

What you should be aware of  is that the basic tenant of a promissory note is that once it is signed by the involved parties and conforms to the specific formalities that must be met in order to be valid, it becomes a legal instrument that can be enforced via legal remedy if one of the parties does not uphold their end of the bargain. It is therefore not a promise that can be easily broken without consequences. If you are the maker, this gives the bearer certain rights that you must be extremely careful not to violate, or else you may find yourself in Court.

Disclaimer: This Document Provides General Guidance Only And Nothing In This Document Constitutes Legal Advice. Should You Require Specific Assistance, Please Contact Your Attorney-At-Law.

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This Article was authored by Cherie Gopie, Partner at M. Hamel-Smith & Co. She can be reached at

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