A promissory note is one of the principal negotiable instruments used in financial transactions. Its practical significance lies in its status as an enforceable instrument that may be submitted to the Enforcement Court, provided that the statutory requirements are satisfied.
What is a promissory note?
A promissory note is a written instrument containing an undertaking by its maker to pay a specified sum of money to the payee, or to the payee’s order, on a specified date.
Article 87 of the Commercial Papers Law sets out the essential particulars of a promissory note, including:
- The words “promissory note”.
- An unconditional undertaking to pay a specified sum of money.
- The maturity date.
- The place of payment.
- The name of the person to whom, or to whose order, payment must be made.
- The date and place of issue.
- The maker’s signature.
What if a required particular is missing?
Article 88 addresses certain omissions. For example, a promissory note that does not specify a maturity date is payable at sight. The Article also addresses the place of payment and place of issue in certain circumstances.
Under Article 89, certain rules governing bills of exchange apply to promissory notes to the extent that they are compatible with the nature of a promissory note.
Is a promissory note an enforceable instrument?
Yes. Article 9 of the Enforcement Law recognises negotiable instruments as enforceable instruments, provided that enforcement concerns a right to a specified amount that is due and payable.
The holder of a promissory note that satisfies the applicable requirements may therefore apply to the Enforcement Court directly, rather than first bringing a substantive claim to establish the underlying debt.
How is a promissory note enforced?
An enforcement application is submitted to the enforcement judge, who verifies that the note satisfies the statutory requirements and then issues an enforcement order to the debtor in accordance with the prescribed procedures.
The Ministry of Justice enables applications for enforcement of promissory notes to be submitted electronically through the Najiz platform. The note is classified under negotiable instruments, with “promissory note” selected as the instrument subtype.
What happens if the debtor does not pay?
If the debtor neither complies nor discloses sufficient assets to satisfy the debt within the statutory period following notification of the enforcement order, the debtor is deemed to be delaying compliance. The enforcement judge may take the measures specified in Article 46 of the Enforcement Law, including a travel ban, disclosure and attachment of assets, enforcement against those assets, and other measures that vary according to the debtor’s circumstances and the subject matter of enforcement.
A promissory note is therefore more than evidence of a debt. Where the statutory requirements are met, it may provide direct access to compulsory enforcement.
