What are the mandatory elements when issuing a promissory note, and is any deficiency ground for cancellation?

1. Introduction

Negotiable instruments are crucial for the security of commercial life and for proving debt and credit relationships. One of the most commonly used types of these instruments is the promissory note. A promissory note is a negotiable instrument strictly bound by the formal requirements specified in the law. Its biggest difference from other ordinary debt instruments is that it provides the unique advantage of being a negotiable instrument that allows for quick follow-up.

Therefore, it is crucial that all mandatory elements are written completely on the promissory note. Otherwise, the note loses its status as a promissory note and becomes an ordinary note.

2. Definition and Characteristics of a Promissory Note

A promissory note is a negotiable instrument in which the issuer, by signing it, undertakes to pay a specified sum to the payee or to their order, unconditionally and without reservation, on a specified date or on demand.
According to the Turkish Commercial Code, a promissory note is considered an order instrument. This means it can be transferred by endorsement.
A promissory note is created by a unilateral declaration of intent. The issuer acknowledges the debt to the creditor.

3. Mandatory Elements According to Article 776 of the Turkish Commercial Code

3.1. The Text of the Document Must Contain the Phrases "Promissory Note" or "Order Note"

Regardless of the language in which it is written, the promissory note must contain the words "bond" or "bill of exchange.".
Without this clause, the document is not a negotiable instrument.

3.2. Unconditional Promise to Pay a Specific Amount

The amount of the payment must be stated precisely and must not be conditional.
For example, clauses such as "payment will be made if the sales contract is fulfilled" invalidate the promissory note.

3.3. Name, Surname or Title of the Beneficiary

It must be clearly stated to whom the promissory note is to be paid.
If the payee is not indicated, the promissory note is not considered to be issued "to bearer"; it is invalid.

3.4. Payment Location

The payment location must be clearly stated on the promissory note.
However, if not explicitly stated, the Turkish Commercial Code provides a supplementary provision: The place written next to the drawer's name shall be considered the place of payment.

3.5. Place and Date of Publication

The date of issuance is important in determining the due date and the statute of limitations.
If the place of publication is not stated, the place written next to the name of the publisher shall be considered the place of publication.

3.6. Author's Signature

A promissory note is invalid without the signature of the actual debtor.
The signature must be handwritten; seals or stamps are not valid.

4. Legal Consequences of Deficiencies

4.1. Deficiencies Leading to Invalidity

The absence of the word "bond,"
Absence of the organizer's signature,
The absence of an unconditional promise of payment,
No specific amount was written.

In these cases, the promissory note is not considered a negotiable instrument.

4.2. Deficiencies that can be remedied

The lack of a place of payment and place of issuance is completed in accordance with the provisions of the Turkish Commercial Code.
However, if the issuance date is missing, the promissory note is not a valid bond.

5. Detailed Examination of the Fictional Event

The incident:
“Delta Tekstil A.Ş.” sells fabric worth 1,000,000 TL to “Omega İnşaat Ltd. Şti.” To guarantee payment, the authorized manager on behalf of Omega İnşaat issues a promissory note. However:

The top of the note reads "payment commitment," but the word "promissory note" is not present.
Payment location is not specified.
The place and date of publication are written on it.
It has a signature.

Legal Analysis:

Since the word "bond" is not present, this document is not a negotiable instrument.
The absence of a place of payment alone does not render the payment invalid; the drawer's address shall be considered the place of payment.
The creditor, Delta Tekstil, cannot collect on this promissory note through enforcement proceedings specific to negotiable instruments at the enforcement office. However, it can be treated as an ordinary promissory note and a lawsuit can be filed in general courts.

Conclusion:
Due to the deficiency, the greatest advantage of the promissory note, the possibility of swift collection, has been eliminated. The creditor will be subjected to a longer and more costly legal process.

6. Common Mistakes in Practice

Replacing the word "promissory note" with "payment note" or "undertaking" on the document.
Leave the date section blank.
The beneficiary's full title is not written.
The price should not be shown both in numbers and in words (this can cause confusion).
Unauthorized persons signing documents on behalf of the company.

7. The Issue of Cancellation Due to Deficiencies in Bonds

Two different concepts are being confused here:

Invalidity: A promissory note that lacks the necessary elements is not considered a promissory note from the outset. This is not cancellation, but outright nullity.
Loss and cancellation lawsuit: If a valid promissory note is lost or stolen, it can be canceled by a court order.

If the document is invalid due to deficiencies, there is no need for an annulment lawsuit; the court will already consider it an ordinary promissory note.

8. Evaluation and Conclusion

A promissory note is one of the most frequently used forms of security in commercial life. However, due to its strict formal requirements, it demands great care when being drawn up. Deficiencies often deprive the creditor of the practical avenues of enforcement provided by commercial law.

In conclusion;

When issuing promissory notes, strict compliance with Article 776 of the Turkish Commercial Code must be ensured.
The word "bond" and the signature are especially essential.
It should be remembered that the deficiencies will directly harm the creditor.

Gamze Akbulut, Law Faculty Student

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