Company and investment
Promissory note
A short instrument in which one party promises in writing to pay a sum to another. Unlike a loan agreement it is one-sided: the borrower signs, and there are few or no obligations running the other way. It names the amount, the interest if any, when payment is due — on a date, on demand, or in instalments — and what happens on default. Whether a note is transferable, and what formalities it needs, depends on the legal system.
- In the catalogue
- Company and investment
- Where it can live
- Any of the 184 governing laws
Who uses one
- Lenders and borrowers who want something shorter than a full loan agreement.
- Companies recording a debt owed to a director, a shareholder or a supplier.
- Anyone formalising money lent to a business on simple terms.
What you are deciding
- The amount, and the currency
- Who promises to pay, and to whom
- Whether interest is charged, and at what rate
- When it is due: a date, on demand, or by instalments
- Whether it may be repaid early
- What happens on late payment or default
- Whether the note may be transferred to somebody else
Blanks you leave stay blank and wait in the room. Nothing is filled in from a guess.
The sections a draft usually has
- 1The promise to pay
- 2Principal amount
- 3Interest
- 4Repayment terms
- 5Prepayment
- 6Default
- 7Transferability
- 8Governing law
- 9Signature
A general outline, not a required one. What turns up in a draft follows what you described. A contract is written in the order a contract is read.
What people call it
The names this kind of paper goes by. They are here because people search for them. They also filter the catalogue. They are not a wordlist the door matches. At the composer you describe the deal in your own words instead.
- promissory note
- iou document
- note payable
- demand note
- loan note
- written promise to pay
Questions people ask
- Is a promissory note enforceable on its own?
- In many systems a properly made note stands on its own as evidence of the debt. What makes it properly made — wording, signature, sometimes witnessing — varies by jurisdiction.
- What does payable on demand mean?
- That the holder may require payment at any time rather than waiting for a date. It changes the borrower's position considerably, so it is stated plainly rather than assumed.
- Can a note be transferred?
- Some are drafted to be, and some are not. Where transferability matters the note says so, because the answer affects who can enforce it.
General answers about the document. Not advice about your situation. Not written about any one country.
Where it lives
A contract names the legal system it is governed by. That is a separate decision from which paper it is. You pick it at the door, from any of the 184 units in Governing law, including England and Wales, Delaware, California and New York.
You do not start from this page. Describe the deal in one sentence at the door. Read the draft back in plain language, in the order a contract is read.
Start it at the door →Related kinds