Points to Consider Regarding the Promissory Note

Important Considerations Regarding Promissory Notes | Izmir Enforcement Lawyer | Izmir Law Firm

Negotiable instruments are limitedly defined in the law as bills of exchange, promissory notes, and checks. Promissory notes are one of these limited instruments and are frequently used in debt relationships. When initiating enforcement proceedings related to a promissory note, the first thing to check is whether the note qualifies as a negotiable instrument.

 1. Essential Elements of a Document  

A promissory note must primarily contain the words "bill of exchange" or "payable to order," an unconditional promise to pay a specified sum, the date of issuance, and a signature. 

• The maturity date, place of payment, and place of issuance of a promissory note are legally non-essential formal requirements. In other words, the absence of these elements does not invalidate the note. A promissory note without a maturity date is considered a note payable on demand. 
• Promissory notes that contain different maturity dates in both numerals and words are void (legally invalid). If they contain different amounts, the amount written in words shall prevail.
• If the place of issuance and payment are not stated on the promissory note, the address written next to the debtor's name shall be considered the place of issuance and payment.  

Interest, competent court, and the phrase "in kind" or "in cash" can also be added to the promissory note. The phrase "in kind" or "in cash" indicates what the note was given in return for. This is important for proof in a possible legal case.

 2. What is a protest? 

Turkish Commercial Code According to Article 714, non-acceptance or non-payment must be documented with an official document called a protest of non-acceptance or non-payment. According to Article 715 of the law, the protest must be drawn up by a notary public in the form and manner specified in Article 716. Furthermore, according to Article 730 of the law, if the holder (creditor) does not draw up a protest of non-payment, they lose the right to recourse against the payee and endorser.

As can be seen, if there are other debtors on the promissory note besides the drawer and the drawer's guarantors (avals), i.e., endorsers, and the note is not protested, the creditor (holder) of the note loses the right to recourse against the debtors listed as endorsers and payees. In other words, they cannot demand and collect the debt from these individuals.

In order to hold the endorser liable for a promissory note, a protest must be sent to the drawer within 2 business days of the due date. Otherwise, the endorsers cannot be held responsible.

•  An important point: If the drawer writes "no protest" or "no expenses" on the promissory note, there is no need to issue a protest.

3-Statute of Limitations on Promissory Notes

Turkish Commercial Code According to Article 749, the statute of limitations against the drawer of a promissory note is 3 years from the due date. For the holder to pursue legal action against the endorsers, proceedings must be initiated within one year from the date of protest, or, if the note contains a clause stating "to be returned without recourse," from the date of maturity. The right of recourse of the endorsing party to recover the payment from the other endorser is subject to a 6-month period.

4. Points to Consider When Drafting a Promissory Note

• The promissory note must be drawn up by the debtor in their own handwriting.
• Both parties must read the agreement before signing it.
• After the promissory note is signed, the debtor must make sure to get a photocopy.
• If there is a separate contract regarding the promissory note, each party must have a copy.
• When the promissory note is paid, the signature section in particular should be torn off and discarded.,
• It should be noted that the payment has been made and the amount has been collected;
• If possible, a note should be added to the receipt stating "Prepared for this document dated [Date] and with [Consistency Number]". 
• Even if paid, the promissory note should be kept for a while to prevent future disputes and incidents involving forged notes.
• A blank promissory note should absolutely not be signed.

5- Enforcement Proceedings for Unpaid Promissory Notes 

If a promissory note is not paid on the promised date, the first step is to protest it. Protests are handled by a notary through the bank. If the debtor fails to pay within two days, the bank holding the note will issue a protest through a notary. This means demanding payment. A debtor who doesn't want their credit score to drop will then be obligated to pay the debt. 

However, if payment is not made, there is a second option: collecting the debt through enforcement proceedings.

A debt collection proceeding based on a promissory note,

• at the debtor's residence
• at the place of payment specified in the promissory note
• arrangement in place
• The proceedings can be initiated at the competent enforcement office specified in the promissory note (provided the applicant is a legal entity).

Once the enforcement proceedings become final, the creditor can seize the debtor's movable and immovable property, as well as their rights and receivables held by third parties. The application of these seizures will make it easier for the creditor to recover their debt. 

If a promissory note is not paid and the creditor wishes to initiate legal proceedings, it is essential to seek advice from an enforcement lawyer to ensure the process is carried out correctly and quickly.

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