An unconditional, written and signed promise, made to a money lender, by the borrower, to pay a certain amount of money, either on demand or at a certain fixed date in the future, is called as a Promissory Note in legal terminology. Such notes are formulated between two or more individuals.
This note does not require any precise words of contract, because, legal effect is an unconditional promise of payment. The intention of a party to make the payments is also, thus, evident. Like a ‘bill of exchange’, this note is not drawn on any third party holding the lender’s money.
A sample note will contain the following essential content:
• Date of the making of the note, which is supposed to be signed.
• It should contain complete legal names of both the parties.
• The address, on which the payment will be sent, should be stated and verified.
• If applicable, the interest rates should be stated.
• It should mention the due dates of the payments of both principal and interest.
• Terms and conditions of penalties or payments before due dates should be mentioned.
• It ought to consist of the late fees assignment as well.
• This note might contain information on payment and repayments or details on the installment payments.
• A Promissory note should be checked, read and signed by the borrower and the loan officer.
When a Promissory note is made, the relation between the two parties is immaterial. This note can be made between any two persons. Usury laws can be applicable in some cases; this depends entirely upon the laws of the state where the note is been made and implemented.
The security and legal terms should be stated as clearly as possible. This part of this agreement will consist of any law suits imposable on the borrower in lieu of his inability to pay off the borrowed money to the lender.