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Purchase Promissory Note Template for India

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Purchase Promissory Note

"I need a Purchase Promissory Note for a machinery purchase worth INR 5,000,000, with monthly installment payments over 18 months starting March 2025, and I want to include equipment security provisions."

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What is a Purchase Promissory Note?

A Purchase Promissory Note is extensively used in Indian commercial transactions where buyers need deferred payment terms for their purchases. This instrument, governed by the Negotiable Instruments Act, 1881, provides sellers with a legally enforceable document while offering buyers flexibility in payment terms. It is particularly useful in situations where goods or services are delivered immediately but payment is to be made at a future date. The document includes essential details such as the principal amount, interest rate (if applicable), payment schedule, and consequences of default. Purchase Promissory Notes are commonly used in both business-to-business and business-to-consumer transactions, offering a structured approach to credit-based purchases while providing legal protection to both parties under Indian law.

What sections should be included in a Purchase Promissory Note?

1. Date and Place: Clear statement of the date and place of execution, essential for determining jurisdiction and limitation period

2. Maker Details: Full legal name and address of the person/entity making the promise to pay

3. Payee Details: Full legal name and address of the person/entity to whom the payment is to be made

4. Promise to Pay: Unconditional promise to pay a certain sum with specific amount in words and figures

5. Payment Terms: Clear specification of when and how the payment will be made, including due date and payment method

6. Interest Rate: Specification of applicable interest rate, if any, and how it will be calculated

7. Security Details: Description of any security or collateral provided against the promissory note

8. Execution: Signature block with maker's signature and witness details

What sections are optional to include in a Purchase Promissory Note?

1. Co-maker Details: Include when there is a co-maker or guarantor for the promissory note

2. Default Provisions: Include specific consequences of default when additional terms beyond standard legal remedies are desired

3. Prepayment Terms: Include when early payment options are to be specifically allowed or restricted

4. Cross-Default Provisions: Include when the note is part of a larger financing arrangement with multiple documents

5. Assignment Clause: Include when transfer or assignment of the note needs to be specifically addressed

6. Governing Law: Include when jurisdiction needs to be explicitly stated, especially for inter-state transactions

What schedules should be included in a Purchase Promissory Note?

1. Payment Schedule: If payments are to be made in installments, detailed schedule of payment dates and amounts

2. Security Details: Detailed description of any collateral or security being provided

3. Related Agreements: List of any related agreements or documents that are referenced in the promissory note

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions


















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Relevant Industries

Retail

Manufacturing

Real Estate

Automotive

Construction

Agriculture

Trading

Small and Medium Enterprises

Consumer Goods

Industrial Equipment

Technology Hardware

Wholesale Distribution

Relevant Teams

Finance

Legal

Accounts Receivable

Treasury

Credit Control

Commercial Operations

Procurement

Sales

Risk Management

Relevant Roles

Chief Financial Officer

Finance Manager

Accounts Receivable Manager

Credit Controller

Commercial Manager

Legal Counsel

Contract Manager

Treasury Manager

Financial Controller

Credit Risk Manager

Procurement Manager

Sales Manager

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