Annulment Of A Promissory Note

A. Promissory Notes

Promissory notes are negotiable instruments containing a promise to pay a specific amount under certain conditions and dates. Their validity depends on strict formal requirements, and they are used for payment or credit purposes in commercial transactions. For detailed information about promissory notes and their validity, please refer to our article.

After the issuer transfers the note to the creditor, the creditor can either keep the note until the due date or transfer it to others through endorsement. In some cases, the note may be lost while in the creditor’s possession or after being transferred to a third party. When a note is lost, stolen, or destroyed, it becomes impossible to present it for payment at maturity. To prevent the rightful holder from losing their rights, certain legal remedies are provided.

B. Lawsuit for Annulment of a Promissory Note

As stated above, when it is impossible to present the note for payment, the rightful holder can file a lawsuit for its annulment. Examples include cases where the note is lost, stolen, or destroyed.

a. Preventive Measures

If the note has been removed from the rightful holder’s possession without consent, it may be presented for payment by an unauthorized person. To prevent this, the court can issue a payment prohibition order when a lawsuit for annulment is filed. During the prohibition period, no one can demand payment from the debtor or the holder.

b. Who Can File an Annulment Lawsuit

Only the rightful holder can file a lawsuit for annulment. The plaintiff must provide convincing evidence for the annulment and submit either a copy of the note or detailed information about its content. Without sufficient evidence or information, the court will not annul the note. The issuer of the note cannot file for its annulment.

c. Court Notices

If the court finds the claim convincing, it will order public notices to be issued three times. These notices invite anyone holding the note to present it within a specified period. The notices also warn that failure to present the note will result in annulment. The period is at least three months and at most one year. However, if less than three months remain before the statute of limitations, the court is not bound by the three-month minimum.

If the note is presented to the court during the notice period, the court grants the rightful holder time to file a recovery lawsuit. If no such lawsuit is filed, the note is returned to the presenter, and the payment prohibition is lifted. If the note is not presented, the court annuls it.

d. Effects of the Annulment

Once the court annuls the note, it can no longer be used to demand payment. The rightful holder can exercise their rights arising from the note without possessing it or request the issuance of a new note.

e. Jurisdiction and Competent Courts

Lawsuits for the annulment of promissory notes must be filed in the Commercial Courts of First Instance. The competent court is determined based on the place of payment or the rightful holder’s residence.