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.

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)

See: bond, draft, pledge, security

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.

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.

References in periodicals archive ?
This exception recharacterizes the initial sale as a transfer of $325,000 worth of limited partnership interest by the client to the trust in exchange for a promissory note with a principal indebtedness equal to $325,000.
In other specialized papers they believe that the commercial credit instrument generically named bill of exchange includes two forms: treat, the first form of the bill of exchange in which are engaged in three persons: the drawer, the shirred, and the beneficiary, and "the promissory note, a second form of the bill of exchange is an easier instrument than the treat, because from the three persons participating in a treat remain only two .
Of that amount, $1 million must be used to satisfy the principal balance on the promissory note J holds.
The Peracchi decision now allows certain creditworthy S corporation shareholders to get additional basis in their S stock simply by issuing an unsecured promissory note to the corporation.
A deficiency notice characterized the loans as going from Dart to HL through Oren, and did not respect the separate checks and promissory notes from Dart to Oren and from Oren to HL.
In Young, 240 F3d 369 (2001), aff'g 113 TC 152 (1999), the Fourth Circuit held that a taxpayer did not recognize gain on the transfer of appreciated land to his former spouse in settlement of his default on a promissory note.
The first contract was a promissory note agreement and the second contract was a bonus agreement.
As previously announced, the acquisition of CTSI concludes the Stock Purchase Agreement dated June 20, 2006 which provided for an aggregate purchase price in the amount of $71,000,000, comprising of a Cash Component of $42,600,000 with a $5 million down payment, and a Promissory Note in the principal amount of $28,400,000 due September 30th, 2006; the Company has the right to two 30 day extensions of the due date of the Promissory Note.
Alternatively, the participant spouse can create a promissory note in favor of the nonparticipant spouse in exchange for the latter's community property interest in all or a portion of the plan assets.
For CSI's assets and technology, Trace agreed (i) to pay $125,000 into escrow at the signing of the Agreement, (ii) to pay $325,000 at the closing of the transaction, (iii) to pay $125,000 by way of a promissory note due 90 days after the closing of the transaction, and (iv) to pay $250,000 by way of a promissory note 180 days after the closing of the transaction (with such two promissory notes referred to as the "Promissory Notes").
to the trust in exchange for a promissory note (bearing interest at the applicable Federal rate (AFR)).
Emalfarb, Dyadic's Chief Executive Officer, President and Chairman, received 251,298 shares of common stock upon the conversion in full of its convertible promissory note which had combined principal and accrued interest of $836,824.