Promissory Note

A Promissory Note is an important payment instrument in international trade. It is a written document issued by the maker (payer) to the payee, in which the maker promises to pay a specified sum unconditionally on a specified date. Unlike a Bill of Exchange, a promissory note is the maker's own promise to pay, not an order to a third party to pay. In international trade, promissory notes are often used by buyers (importers) to provide payment guarantees to sellers (exporters). Especially in large transactions or installment payments, the buyer may issue a promissory note to acknowledge the debt. When using a promissory note, note the following: it must contain an unconditional promise to pay, the payment amount, the payment term, and the payee's name; if it is a usance promissory note, the maturity date must be specified; the credit basis of a promissory note is the maker's commercial reputation, so exporters should assess the importer's creditworthiness. In addition, the core difference between a promissory note and a bill of exchange is that a bill of exchange involves three parties (drawer, drawee, payee), while a promissory note involves only two parties (maker, payee); a bill of exchange requires acceptance, while a promissory note does not.