promissorynote

A promissory note is a written, unconditional promise by one party (the maker) to pay a definite sum of money to another party (the payee) or holder, either on demand or at a specified future date. It is a common instrument in lending arrangements, used to document a debt between individuals or between businesses.

Key elements typically include the promise to pay, the fixed amount, the name of the payee or bearer, the payment date or demand language, the place of payment, the date, and the maker’s signature. Optional terms may specify an interest rate, maturity terms, and penalties for late payment. Notes may be classified as demand notes (payable on request) or time notes (payable at a fixed date). They can also be bearer instruments (payable to whoever holds the note) or to-order instruments (payable to a named person or to someone who is endorsed on the note).

Transfer and negotiability: A note payable to order can be negotiated by endorsement and delivery; a bearer note can be negotiated by possession. In many jurisdictions, promissory notes are negotiable instruments under law such as the UCC Article 3 in the United States, which sets standards for negotiability; non‑negotiable notes may still create a valid contract, but their transfer rules differ.

Relation to other instruments: A promissory note differs from a bill of exchange or a cheque, which involve different parties and procedures. Often, a note may be secured by collateral or a separate security agreement, such as a mortgage or deed of trust, or it may be unsecured.

Uses and enforcement: Promissory notes provide evidence of debt and create a legal obligation to pay. If a borrower defaults, the holder may seek civil remedies to recover the amount due.