A promissory note not to order is an accounting document through which a natural or legal person agrees to pay someone a certain amount of money within a specified period of time. And that allows its transfer to a third party, only by transfer of credit.
When we refer to a promissory note not to the order, we must understand that we are dealing with a promissory note but with a peculiarity. The peculiarity of a promissory note not made to order is that it can only be transferred to a third party by transfer of credit.
Conversely, a made-to-order note can be transferred by endorsement. See promissory note to order
Assignment of credit in a promissory note not to order
Of course, what does transfer of credit mean? What it means is that to transfer the collection rights to another person, we must sign a document before a notary. Technically this means that it is a bilateral process. That is, a process in which three parties intervene:
- Assignor: It is to whom the payment was promised in the first instance. That is, the initial beneficiary.
- Assignee: This is the person who will receive the collection rights. That is, the new beneficiary.
- Signatory: You must consent to the transfer by signing.
Therefore, to transfer the collection rights to another person, assignor, assignee and signatory must give their consent. In simpler words, all three must agree to the handover.
In addition, in the case of a promissory note, it was not necessary to notify the person who promises to pay (signer). While in the promissory note not to order, it is mandatory to notify the signer. In fact, the signer must consent to it with his signature.
Responsibility in the assignment of credit
At the legal level, unless otherwise indicated, the person who assigns the credit (assignor), does not respond if the debtor (signer) is declared insolvent. That is, unless it is committed to it, if the signer does not pay, the initial beneficiary (assignor) does not respond to the new beneficiary (assignee).
One of the advantages of the not-to-order promissory note is precisely the responsibility of the assignor. In other words, we must express that we are in agreement with the transfer of the promissory note so that those rights can be transferred to us. Thus, if we doubt that the signer can pay us in the future, it is enough to not sign in order not to receive that promissory note.
Characteristics of a promissory note not to order
A promissory note not made to order, has characteristics common to a normal promissory note. Now, it also has others that differentiate it from a regular promissory note. The characteristics of a promissory note not to order are:
- A promissory note is "not to order" only if specified: If the promissory note does not specify anything, then it is not a not to order promissory note.
- It can be assigned to another person: Of course, to be assigned, the assignor and assignee must sign. Which means that the initial beneficiary and the future beneficiary must agree to that assignment.
- It is mandatory to notify the signer: In the event that a third party (transferee) is transferred, it is necessary to certify the signer and that he / she embodies his signature on the transfer. That is, we must also notify the person who promised to pay.
- The new beneficiary must give their consent: As we have indicated previously, for the non-made-to-order promissory note to be assigned, there must be a mutual agreement. Both the new beneficiary and the initial beneficiary. To do this, they must sign a document before a notary.
In short, the not-to-order promissory note is a type of promissory note that can only be transferred by assignment of credit.
See difference between promissory note to order and not to order