The Promissory Note as a Negotiable Instrument
The promissory note is a negotiable instrument that confers a right of credit, similar to a bill of exchange.
For the promissory note to be valid and effective, it must comply with the strict formalities established in Law 19/1985, of July 16, on Bills of Exchange and Checks. This document represents a promise to pay a specific sum of money to a designated person.
Essential Requirements of the Promissory Note
For the promissory note to have full legal effect, it must meet the requirements established in Article 94 of the Bill of Exchange and Check Law. The most relevant include:
- Denomination as “Promissory Note”: This term must be explicitly stated in the document.
- Pure and Simple Promise to Pay: It must reflect an unconditional promise to pay a specified amount in euros.
- Place of Payment: The place where payment will be made must be clearly indicated.
- Payee (Recipient of Payment): The name of the individual or entity to whom the promissory note is issued must be specified.
- Maturity Date: If no specific date is indicated, it will be considered payable upon sight.
- Date and Place of Issuance: The document must detail when and where it was signed.
- Issuer’s Signature: If the issuer is a legal entity, it must include the corporate name or add a seal or pre-signature along with the representative's signature.
It is crucial that the promissory note includes all these elements, as their absence prevents it from having enforceable power under the Bill of Exchange and Check Law.
Legal Actions Derived from the Promissory Note
Article 49 of the Bill of Exchange and Check Law establishes two types of legal actions in cases of non-compliance:
- Direct Action: Directed against the acceptor or their guarantors in case of non-payment. This action does not require a protest and has a statute of limitations of three years from the maturity date of the promissory note.
- Recourse Action: This action is taken against other liable parties when payment or acceptance has been refused, provided a protest is issued as proof of such non-compliance.
The Bill of Exchange Law requires a protest for the recourse action to be valid. In the absence of this formality, the right to exercise this action lapses.
Principle of Solidarity
According to Article 57 of the Bill of Exchange and Check Law, all obligated parties (those who issued, accepted, endorsed, or guaranteed the promissory note) are jointly liable to the holder.
Thus, the promissory note is a highly relevant legal instrument in commercial transactions, but its validity and effectiveness depend on strict compliance with the formalities required by law.
