A promissory note is a formal obligation to pay a sum of money within a certain amount of time. This form of contract binds a borrower’s pledge to repay a loan within a certain time frame, and all parties must sign it. It mostly consists of the date on which someone must be paid, the method by which an individual or organization must be paid, and the amount by which a person or organization must be paid (Chron, 2019). The promissory note made between Jones and Layla will be considered valid since the amount to be paid as well as the time frame for payment has also been stated.


In this case, Jones was represented by an agent, Tom, who also signed the document stating “Tom, as agent for Jones”. An agent is an individual or organization that has been given lawful authority to control on behalf of another person (Barone, 2020). This simply means that Jones is still liable for payments for the amount owed to Layla. According to (Chron, 2019), A representative of the company or individual signs the document on behalf of the company accepting the loan, committing the company or individual to pay it back.

When considering who signed the note, an appointed agent may bind his or her signature on a contract by explicitly indicating that he or she is signed on behalf of the creditor by signing the instrument. The creditor, not the agent, would be responsible on the instrument in this situation (Klett, no date). Jones is the sole party responsible because Tom expressly claimed that he is Jones’ agent without ever claiming that he signed on his own behalf.

In the case of Mary, Paul and Harry, Mary will not be required to pay for the amount stated in the negotiable promissory note regardless of her signing the document. This is simply because Paul acquired the document through a fraudulent method. All arrangements, including those involving negotiable devices, must have been made with the free consent of the parties involved. Any contract under which consent was gained by deception is voidable at the discretion of the individual who gave the consent (Kundu, p.32).


However, Paul will not be liable for the forgery since he negotiated the document to Harry making him the holder in due course. A holder in due course is any person who, for valuable consideration, becomes the possessor of a negotiable instrument payable to bearer or the indorsee or payee thereof, before the amount mentioned in the document becomes payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derives his title (Kundu, p.36).

According to Kundu (p. 32) however, if such an instrument is sent to a holder in a responsible way, the holder would not be entitled to use the fraud protection. This means that neither Paul nor Harry will be liable for the fraud, all this assuming that harry was unaware of how the negotiable promissory note was acquired.



Chron,2019. What can void a promissory note. [online](updated March 8, 2019) Available at:

Barone A. 2020. Promissory note. [online](updated March 15, 2020) Available at:

Klett T. Negotiable instruments: Liability, Defenses and Discharge. [online] Available at:

Kundu S. S. Principles of insurance and banking. [online] Available at:

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