The two key parties to a promissory note are the
a. maker and a bank.
b. debtor and the payee.
c. maker and the payee.
d. sender and the receiver.
The correct answer and explanation is :
The correct answer is c. maker and the payee.
A promissory note is a written promise made by one party (the maker) to pay a specific sum of money to another party (the payee) at a predetermined time or on demand. The document outlines the terms of repayment, including the amount, interest rate (if applicable), and maturity date.
Explanation:
- The Maker: The maker of a promissory note is the person or entity who creates the note and agrees to pay the specified amount. This person may be an individual, a company, or another legal entity. The maker is responsible for fulfilling the promise to pay as stated in the note. In the event that the maker fails to meet their obligation, they could face legal consequences.
- The Payee: The payee is the person or entity to whom the money is owed. The payee can be a lender, an individual, a financial institution, or any other party entitled to receive the payment. The payee is the recipient of the funds once the note matures or when the note is presented for payment.
In addition to these two primary parties, there could be other parties involved in certain situations, such as a guarantor (who guarantees the payment of the note) or endorsers (who may transfer the note to another party). However, the fundamental parties in a promissory note are always the maker and the payee.
To summarize, the maker is the debtor who promises to repay, and the payee is the party who is entitled to receive the payment.