A promissory note
is a common type of legal document
used in various business transactions
. Promissory notes are common in real estate and corporate finance arrangements, but can be used in almost any situation where one party agrees to loan money to another as a formal agreement between the parties. Although they are often short and simple, promissory notes are nonetheless important, and must be drafted carefully. Our Chicago business attorneys regularly develop and draft promissory notes for a number of businesses and individual clients.
Generally, a promissory will tell a number of things, including the amount of money owed, the sources for the said amount, the repayment methods, the duration within which the amount must be repaid, interest charged, requirements for collateral (if any), the terms for any loan acceleration, and the conditions regarding any installment payments allowed. Additionally, a promissory note will set forth the legal consequences for a breach or default of the agreement. Once the note is properly executed, the parties have entered into a legal contract that can be enforced under the law.
Promissory notes can be used for a number of transactions, especially those involving products or services. It is an acknowledgement that a debt is owed, and that said debt will be repaid within a specific amount of time. For example, it may involve a contractor that expects to be paid upon completion of a job, or a client that has ordered a large sum of product, but can’t pay until some of the product has been sold.