Financial Instruments: Promissory Notes and Bank Payments

Understanding the Promissory Note

A promissory note is a written commitment by a person or entity, known as the signer (or issuer), to pay a specified amount to a beneficiary or an endorsed party. This document outlines the payment amount, the place of maturity, and a fixed payment date.

Key Features of Promissory Notes

• The amount can be specified in euros or any officially quoted, convertible foreign currency.
• The signer of a promissory note is obligated to pay, similar to the acceptance of a bill of exchange.
• A promissory note can also function as a negotiable instrument: it can be endorsed, discounted, or submitted for collection.
• Promissory notes are subject to tax on documented legal acts, similar to bills of exchange, especially if they are issued "to order," discounted, or presented for payment by a third party outside the original place of issuance.

Essential Requirements

• A promissory note must specify a maturity date; it is not typically considered suitable for "at sight" payment.
• A promissory note does not require formal acceptance, as the signer is already legally obligated to pay.

Mandatory Content

• The document must clearly identify the party issuing the promissory note (the signer) and their obligation to pay.
• If the place of issue is not explicitly stated, it is legally considered signed at the location indicated next to the signer's name.

Processing and Lifecycle

• Issuance: A promissory note can be issued in favor of a specific person or entity, and may include a clause prohibiting further endorsement.
• Key Stages: Endorsement, Payment, Protest, and Aval (Guarantee).

Promissory Notes vs. Bills of Exchange: Key Differences

• In a promissory note, the debtor is the issuer (signer) who directly promises to pay the beneficiary.
• In a bill of exchange, the drawer (creditor) issues an instruction to the drawee (debtor) to pay a third party (payee).
• A promissory note primarily involves two parties: the debtor (signer) and the creditor (payee).
• A bill of exchange typically involves three parties: the drawer (creditor), the drawee (debtor), and the payee (holder).

Understanding Direct Debits

A direct debit is a standard payment method where funds are automatically debited from a bank account. Banks and credit institutions widely support and facilitate direct debits, often allowing for their discounting.

Features of Direct Debits

• Maturity: Specifies the exact payment date.
• Concept: States the reason or purpose for which the payment is being issued.
• Payer Details: Requires indicating the name of the bank branch of the organization to be paid, and the name of the account holder if it differs from the payer specified in the document.