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Blank Promissory Note as Security for the Loan

In the cycle on how to secure the bank’s receivables, the time has come for the episode with a blank promissory note. Repayment of the loan granted by the bank can be secured with such a promissory note, which is why I would like to bring you closer to today some important issues that are related to this.

What is a blank promissory note?

What is a blank promissory note?

Generally, a promissory note is a security that contains in its content an unconditional commitment of its issuer or a person whom the issuer has indicated to pay the indicated sum to the person indicated. The sum should be paid at the date and place specified in the promissory note. The obligation arising from the promissory note is abstract in nature, which means that it arises regardless of the reason and purpose of issuing the bill of exchange. The content of the promissory note determines the scope of responsibility of the obligated person from the promissory note. The promissory note is a promissory note in which the issuer is obligated with a promissory note, i.e. a person signed on the bill of exchange.

Theoretically, a promissory note can be handwritten on an ordinary piece of paper. If it has all the necessary elements specified in the promissory note law, it will be valid. In practice, to best mitigate the risk of possible mistakes, it is best to use bill of exchange.

A blank promissory note (otherwise incomplete ) is a bill that lacks at least one element required to be valid in accordance with the requirements of the promissing law referred to above.

A blank promissory note may be submitted by the borrower (the bank’s debtor) or a third party to secure the loan. Such a promissory note may constitute a security for the entire amount of the loan granted, i.e. capital, interest and other incidental debts, as well as part of the loan, e.g. individual installments or installments. You can also deposit more than one promissory note with the bank for loan collateral.

In practice, the situation in which a blank promissory note is the only loan security is rare. If this is the case until other security targets have been established, e.g. until the mortgage is entered.

Banks are willing to accept a promissory note as an independent hedge when a client who is known to them has good creditworthiness.

The promissory note security is personal. The person obliged by the promissory note bears the personal responsibility for repaying the debt from his entire estate.

Who can put up a blank promissory note?

Who can put up a blank promissory note?

An issuer of a blank promissory note, in order to effectively and validly issue such a document, must be able to incur promissory note obligations, that is, the ability to be the subject of rights and obligations under the promissory note. The bill may be issued to individuals with full legal capacity and legal capacity under civil law, legal persons, personal commercial companies and other entities to which such a right is granted by law.

A civil partnership does not have a promissory note, so it can not effectively issue a bill on its own behalf. The shareholders of such a company may issue a bill of exchange.

To issue a blank promissory note, persons authorized to represent the entity on behalf of which the bill of exchange signs are attached. These data can be checked in the National Court Register. In a situation when a promissory note is to be signed by another person, it should have an appropriate power of attorney granted by persons authorized to represent a given entity with a date earlier than the date of issue of the bill of exchange.

Elements of a blank promissory note.

Elements of a blank promissory note.

A blank promissory note should have at least the signature of the issuer (promissory note debtor) with the intention of making a promissory note. The signature should cover the whole content of the promissory note and be below the promise of payment of the promissory note sum. It should be hand-made and contain at least the name of the exhibitor. There is no requirement to be legible, but it should be submitted in the form customarily used by the exhibitor. In order to avoid any doubts, it is recommended to enter the name and surname of the exhibitor under an illegible signature.

When accepting a promissory note, the bank should be sure that the issuer’s signature is hand-made. It is best that the exhibitor signs it in the presence of a bank employee. Another option is to confirm the signature at the notary.

On the blank promissory note submitted as collateral for the loan, you can also place other elements of the promissory note:

  • date and place of issue of the bill of exchange,
  • date and place of payment,
  • the name of the remitter along with its registered office, i.e. the bank that granted the loan,
  • the clause of unconditional payment promise, eg “I will pay” or “pay” (depending on who is the issuer),
  • the symbol of the currency of the promissory note.

However, on such a promissory note, you should not enter a promissory note. At the time of its placement at the bank it is not known yet what amount it should be paid.

Bill declaration.

Bill declaration.

A blank promissory note deposited in a bank to secure a loan should be accompanied by a promissory note agreement, also known as a promissory note declaration. It is a document that defines the terms of the agreement set by the bank with the bill of exchange issuer as to when and how the promissory note may be supplemented. The promissory note declaration should contain:

  • identification of the claim for which the promissory note was submitted (in the case of a loan it will be a credit agreement),
  • circumstances which the bank will be entitled to supplement the promissory note,
  • the amount on which the promissory note may be filled in (it may be indicated by indicating a specific amount or in a descriptive manner, e.g. “up to the amount of unused and used credit together with interest, commission and other debts of the bank”),
  • defining the type of payment deadline in accordance with the Bill of Exchange Act, e.g. on a given date, some time after the date of issue, upon presentation, and some time after presentation.

In the promissory note declaration, you can also save:

  • the date by which the promissory note may be supplemented by the bank,
  • obligation for the bank to notify the issuer of the completion of the promissory note or the intention to supplement the promissory note,
  • the bank’s obligation to return the bill after paying off the loan for the security whose bill was submitted or the authorization for the bank to destroy it or deprivation of its legal force by deleting it,
  • clauses which the promissory note contains or authorize the bank to enter the relevant clauses on the bill of exchange, e.g. “without protest”, “without costs”, prohibiting endorsement of the bill of exchange, i.e. “not commissioned”, “without endorsing”, referring to the bill of exchange the so-called. domicyliatu, for example, “the bill will be payable in Warsaw”.

The bank accepting the wedding reception is not obliged to sign the promissory note declaration. His declaration of will results from the fact of accepting this document from the exhibitor. However, the promissory note agreement may take the form of a document signed by both the issuer and the bank.

If several promissory notes are submitted for the loan collateral, the promissory note should state how many of them are and how they secure the loan. Individual bills of exchange may secure the repayment of certain parts of the loan, installments or tranches. In the absence of such provisions, it should be assumed that each bill of exchange secures the entire loan.

The lack of a promissory note declaration does not invalidate the promissory note. However, it must be remembered that by issuing a blank promissory note, the issuer authorizes the bank to supplement its content in accordance with its will.

Bill of exchange and consumer credit.

Bill of exchange and consumer credit.

Consumer Credit Act prohibits reception of the borrower from the consumer other than the bills classified as “not to order” or equivalent (eg. “Without endorsing”). Such clauses mean that the bill received from the borrower-consumer can not be sold in the so-called indos. Its redemption should be made only to the person for whom it was issued, i.e. from the lender. If the creditor accepts as a security a promissory note without a ‘non-contractual’ (or equivalent) clause, he must repay the damage suffered by the consumer if he has to pay for the bill of exchange to another person. I wrote about it here: A consumer credit agreement and consumer rights based on it.

The bill has been topped up by the bank.

The bill has been topped up by the bank.

The bank will have the right to supplement the blank promissory note primarily when the loan it secured has not been repaid in full or in part in the specified period or in those situations in which it has the right to demand repayment of the loan before that date. As I have already mentioned, this should result from the promissory note declaration.

The blank promissory note after the bank has completed should have all the elements necessary to be valid in accordance with art. 101 of the promissory note law, i.e.:

  • name? bill? in the text of the document in the language in which it was issued,
  • an unconditional promise to pay a defined sum of money (the promissory note should include the amount and currency),
  • payment deadline
  • place of payment
  • determination of the remitter for whom the payment is to be made (in the case of loan security it will be the bank that granted it),
  • the date and place of issue of the bill of exchange,
  • signature of the bill of exchange issuer.

Only the supplement of the bill of exchange with all the above elements results in the obligation of the bill-of-exchange issuer to pay a specified sum of money to the bank.

The Bank has no right to supplement the bill of exchange if there are no circumstances specified in the promissory note agreement (promissory note declaration). Remember, however, that although the promissory note would be supplemented contrary to the conditions set out in the promissory note declaration, it will be valid. However, at the time, the promissory note maker has the right to raise the objection that the bill of exchange has been supplemented in breach of what has been established in the promissory note declaration. Such a charge should result in the exclusion of his liability from the promissory note. However, if the blank promissory note is partially supplemented with the promissory note declaration to the detriment of the exhibitor, the issuer will be obliged to pay the bill in the extent that the promissory note has been completed in accordance with the declaration. For example, the promissory note has been supplemented by an amount higher than the amount specified in the promissory note declaration. Then, the issuer will be obliged to pay from the promissory note up to the amount specified in the bill of exchange declaration.

If the loan obligation that the blank promissory note secured expired, the bank has no right to supplement such promissory note.

Claims arising from a bill of exchange.

Claims arising from a bill of exchange.

In the event that the blank promissory note issuer did not purchase it in accordance with the bank’s request, the bank has the right to take legal action against the statement of claim in the pre- litigation procedure. The prescriptive procedure is a simplified and faster procedure in relation to the ordinary civil procedure. By issuing a payment order against the issuer, the court decides that he has the obligation within two weeks from the date of delivery of the payment order to satisfy the bank’s claim in full together with the costs or to file charges within this period. A payment order issued on the basis of a promissory note may be placed in an abbreviated form on its copy. The order for payment is the title of the collateral from the moment it is issued, enforceable without giving it an enforcement clause.

Surety on a blank promissory note.

Surety on a blank promissory note.

A blank promissory note may be signed with a promissory note. You will find out more about this surety and the legal consequences associated with it here: “Bail surety and the bank’s receivables”.