Note is an unconditional written promise to pay a specified sum of money on demand or at a given date to a designated person. The one who signs the note is called the maker. The one to whom it is made payable is called the payee. This written promise is called a promissory note. Note of hand is a name sometimes used for a promissory note.
Suppose that Arlene Shaw, a retail merchant with a good business and a good financial standing, needs $500 worth of merchandise but does not have the cash to pay for it. She knows that she has accounts coming due within 60 days. She will be able to pay the $500 when she is paid by those who owe her. She goes to Henry Brown, a wholesale merchant, who sells her the goods and takes her note.
Brown can endorse the note and cash it at the bank, if he needs the money before 60 days. Shaw will then pay the bank when her note becomes due. Sometimes the maker specifies the actual date of payment in the note.
Liability of the maker.
A note is negotiable when it is made payable to “bearer” or includes the word “order,” like the one given above. When a note has been transferred by endorsement, the person in possession of the note is known as the holder. The holder can transfer it to another by endorsing it, and so on indefinitely, just as a bank check can be transferred. When the note falls due, the holder looks to the maker for payment. The law protects the holder under almost all conditions, including some kinds of fraud or cheating by the payee.
An endorser is liable in case the maker fails to pay the note when it falls due. The endorser is served with a notice called a protest. It is signed by a notary public, and one copy is sent to each endorser if there is more than one (see Notary public ).
Caution.
No one should sign a document without fully understanding what is being signed. A lawyer should examine any document that the maker does not understand. The law holds the maker responsible for his or her signature, except when any part, or all, of the document is proved fraudulent in court, or is proved to have been altered without the maker’s knowledge, after it was signed in good faith.
