Which of the following is true of a promissory note?
A) It is a three-party instrument.
B) It is not an order to pay.
C) The party who makes the promise is the lender.
D) The payee cannot transfer a note to a third party.

Question

Quizplus · Accepted Answer

A promissory note is a financial instrument that contains a written promise by one party (the issuer or maker) to pay another party (the payee) a definite sum of money, either on demand or at a specified future date. It is a two-party instrument, not a three-party one, making option A incorrect. The party making the promise is the borrower, not the lender, which makes option C incorrect. Promissory notes can be transferred to third parties unless specifically stated otherwise, making option D incorrect. Option B is correct because a promissory note is a promise to pay, not an order to pay, which distinguishes it from instruments like checks.

Which of the Following Is True of a Promissory Note