promissory note


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Promissory Note

A written, signed, unconditional promise to pay a certain amount of money on demand at a specified time. A written promise to pay money that is often used as a means to borrow funds or take out a loan.

The individual who promises to pay is the maker, and the person to whom payment is promised is called the payee or holder. If signed by the maker, a promissory note is a negotiable instrument. It contains an unconditional promise to pay a certain sum to the order of a specifically named person or to bearer—that is, to any individual presenting the note. A promissory note can be either payable on demand or at a specific time.

Certain types of promissory notes, such as corporate bonds or retail installment loans, can be sold at a discount—an amount below their face value. The notes can be subsequently redeemed on the date of maturity for the entire face amount or prior to the due date for an amount less than the face value. The purchaser of a discounted promissory note often receives interest in addition to the appreciated difference in the price when the note is held to maturity.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

promissory note

n. a written promise by a person (variously called maker, obligor, payor, promisor) to pay a specific amount of money (called "principal") to another (payee, obligee, promisee) usually to include a specified amount of interest on the unpaid principal amount (what he/she owes). The specified time of payment may be written as: a) whenever there is a demand, b) on a specific date, c) in installments with or without the interest included in each installment, d) installments with a final larger amount (balloon payment). A promissory note may contain other terms such as the right of the promisee to order payment be made to another person, penalties for late payments, a provision for attorney's fees and costs if there is a legal action to collect, the right to collect payment in full if the note is secured by real property and the property is sold ("due on sale" clause), and whether the note is secured by a mortgage or deed of trust or a financing statement (a filed security agreement for personal collateral). The promissory note is usually held by the party to whom the money is owed. There are legal limitations to the amount of interest which may be charged. Charging a rate in excess of the legal limit is called "usury," and this excess is legally uncollectible. When the amount due on the note, including interest and penalties (if any) is paid, the note must be cancelled and surrendered to the person(s) who signed it. A promissory note need only be signed and does not require an acknowledgement before a notary public to be valid. (See: interest, obligor, obligee, usury)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.

promissory note

promissory notes are one species of NEGOTIABLE INSTRUMENT. Section 83 of the BILLS OF EXCHANGE ACT 1882 refers to ‘an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time, a sum certain in money, to or to the order of a specified person or to a bearer.’ A promissory note differs from a bill of exchange in that the maker stands in the place of both the drawer and the acceptor.
Collins Dictionary of Law © W.J. Stewart, 2006

PROMISSORY NOTE, contracts. A written promise to pay a certain sum of money, at a future time, unconditionally. 7 Watts & S. 264; 2 Humph. R. 143; 10 Wend. 675; Minor, R. 263; 7 Misso. 42; 2 Cowen, 536; 6 N. H. Rep. 364; 7 Vern. 22. A promissory note differs from a mere acknowledgment of debt, without any promise to pay, as when the debtor gives his creditor an I 0 U. (q.v.) See 2 Yerg. 50; 15 M. & W. 23. But see 2 Humph. 143; 6 Alab. R. 373. In its form it usually contains a promise to pay, at a time therein expressed, a sum of money to a certain person therein named, or to his order, for value received. It is dated and signed by the maker. It is never under seal.
     2. He who makes the promise is called the maker, and he to whom it is made is the payee. Bayley on Bills, 1; 3 Kent, Com, 46.
     3. Although a promissory note, in its original shape, bears no resemblance to a bill of exchange; yet, when indorsed, it is exactly similar to one; for then it is an order by the indorser of the note upon the maker to pay to the indorsee. The indorser is as it were the drawer; the maker, the acceptor; and the indorsee, the payee. 4 Burr. 669; 4 T. R. 148; Burr. 1224.
     4. Most of the rules applicable to bills of exchange, equally affect promissory notes. No particular form is requisite to these instruments; a promise to deliver the money, or to be accountable for it, or that the payee shall have it, is sufficient. Chit. on Bills, 53, 54.
     5. There are two principal qualities essential to the validity of a note; first, that it be payable at all events, not dependent on any contingency; 20 Pick. 132; 22 Pick. 132 nor payable out of any particular fund. 3 J. J. Marsh. 542; 5 Pike, R. 441; 2 Blackf. 48; 1 Bibb, 503; 1 S. M. 393; 3 J. J. Marsh. 170; 3 Pick. R. 541; 4 Hawks, 102; 5 How. S. C. R. 382. And, secondly, it is required that it be for the payment of money only; 10 Serg. & Rawle, 94; 4 Watts, R. 400; 11 Verm. R. 268; and not in bank notes, though it has been held differently in the state of New York. 9 Johns. R. 120; 19 Johns. R. 144.
     6. A promissory note payable to order or bearer passes by indorsement, and although a chose in action, the holder may bring suit on it in his own name. Although a simple contract, a sufficient consideration is implied from the nature of the instrument. Vide 5 Com. Dig. 133, n., 151, 472 Smith on Merc. Law, B. 3, c. 1; 4 B. & Cr. 235 7 D. P. C. 598; 8 D. P. C. 441 1 Car. & Marsh. 16. Vide Bank note; Note; Reissuable note.

A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier. Published 1856.
References in periodicals archive ?
The lender then takes the promissory note to a collection office, initiates legal actions against the borrower and obtains a judgment-payment order against the borrower to collect the sum stipulated in the promissory note, this time, with interest.
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As a result of the exchange, the promissory note will be cancelled and retired.
A promissory note has four essential ingredients: Who owes whom; how much; when it is due to be repaid; the interest rate.
With the recent decline in the value of real estate and marketable securities and the decline in the AFR, what should a client do when the unpaid principal amount of the promissory note exceeds the current value of the limited partnership interest that was sold, or if the current AFR is less than the stated interest rate on the note?
In a lawsuit filed in Belknap County Superior Court in February against Whitcher, Meredith Bay Village's chief operating officer, the bank alleged that Whitcher has been unable to make monthly payments on three promissory notes. The bank previously foreclosed on the property on Route 25 at the foot of High School Hill and then held an auction on Oct.
The issue of a promissory note by the importer or the acceptance of a Bill of exchange by the exporter are means of accomplishing personal guarantee.
In support of its conclusion, it pointed to the following: (1) the existence of a promissory note calling for fixed annual payments; (2) the debt was secured by the taxpayer's real property and a mortgage was recorded in the local county recorder's office; and (3) Amoco routinely enforced the collection of promissory notes in the event retailers defaulted.
Government we will ask you to sign a promissory note and we will bill you at a later date."
In addition, the PLUS master promissory note is currently written for parents and there is no PLUS promissory note for graduate students.