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Difficulty: MediumMeans of Payment in Home Trade

A promissory note is an unconditional order in writing drawn by a creditor requiring a debtor to pay a specified sum of money on demand or at a fixed future date.

Answer: Answer

Answer

The statement is false. A promissory note is an unconditional written promise made by a debtor to pay a sum of money to a payee, whereas an unconditional written order drawn by a creditor requiring a debtor to pay is a bill of exchange.
The statement is false because it provides the legal definition of a bill of exchange rather than a promissory note. A promissory note contains an unconditional promise made by the debtor (maker) to pay a specific sum to the creditor (payee), whereas a bill of exchange is an unconditional order drawn by the creditor on the debtor.

Step-by-Step Solution

1
Analyze the core definition provided in the statement.
The statement defines the instrument as an 'unconditional order in writing drawn by a creditor'.
Identifying whether an instrument is an order or a promise is essential to identifying negotiable credit instruments in home trade.
2
Compare the definition against legal characteristics of credit payment instruments.
A bill of exchange is an unconditional order issued by a creditor (drawer) to a debtor (drawee). A promissory note is an unconditional promise issued by the debtor (maker) to the creditor (payee).
The debtor initiates a promissory note by promising payment, whereas the creditor initiates a bill of exchange by ordering payment.
3
Determine the validity of the statement.
The statement misattributes the definition of a bill of exchange to a promissory note, making the statement false.
Conflating an order drawn by a creditor with a promise made by a debtor represents a misconception of payment instrument roles.

Key Concept

Characteristics and distinction between Promissory Notes and Bills of Exchange in Home Trade
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Topics

Means of Payment in Home Trade

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