Chapter II - Of Notes, Bills and Cheques
Section 4
Section 4: promissory note
A promissory note is a written instrument, signed by its maker, with an unconditional undertaking to pay a certain sum of money to an identified payee, their order or the bearer.
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Need advice on Section 4?
This article is for general information. Refer to the Negotiable Instruments Act, 1881 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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.
Applicability and limits
A document must be written, signed by the maker and contain an unconditional undertaking to pay a certain sum of money to the named payee, their order or bearer.
An acknowledgement of debt or a promise conditional on another event is not necessarily a Section 4 promissory note; read the instrument’s actual words.
Hypothetical example
Hypothetical: a founder signs “I promise to pay ₹50,000 to A on 30 June.” Compare this with a note that merely says “₹50,000 due” before treating either as negotiable.
Evidence and decision flow
Read the exact payment promise and any condition.
Check maker signature, certain amount and payee wording.
Keep the original signed document and delivery record.
Practical checklist
Do
- Use clear unconditional payment wording.
- State the money sum and payee precisely.
- Keep the signed instrument and transaction trail.
Avoid
- Do not assume a bare IOU is a statutory promissory note.
- Do not add a non-money obligation to the payment promise without legal review.
Glossary
- Maker
- The person who signs and undertakes to pay the note.
- Unconditional undertaking
- A clear payment promise that is not dependent on another event.
Frequently asked questions
Is an IOU automatically a promissory note?
No. Section 4 requires an unconditional undertaking to pay, not merely an acknowledgement.
Why does the payee wording matter?
The amount must be payable to, or to the order of, a certain person or to bearer under the section.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026