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Encyclopedia > Promissory note

A promissory note is a contract detailing the terms of a promise by one party (the maker) to pay a sum of money to the other (the payee). The obligation may arise from the repayment of a loan or from another form of debt. For example, in the sale of a business, the purchase price might be a combination of an immediate cash payment and one or more promissory notes for the balance. A contract is a legally binding exchange of promises or agreement between parties. ... An example of Money. ... A loan is a type of debt. ... Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. ...


The terms of a note typically include the principal amount, the interest rate if any, and the maturity date. Sometimes there will be provisions concerning the payee's rights in the event of a default, which may include foreclosure of the maker's interest. Demand promissory notes are notes that do not carry a specific maturity date, but are due on demand of the lender. Usually the lender will only give the borrower a few days notice before the payment is due. An interest rate is the price a borrower pays for the use of money he does not own, and the return a lender receives for deferring his consumption, by lending to the borrower. ... Maturity date is a term in finance - a date when a bond could be called. ... In finance, default occurs when a debtor has not met its legal obligations according to the debt contract, e. ...


For loans between individuals, writing and signing a promissory note is often considered a good idea for tax and recordkeeping reasons.


A promissory note differs from an IOU in that the latter is a simple acknowledgement of the existence of a debt owed, whereas a promissory note, as its name implies, contains an affirmative undertaking to pay the amount stated. IOU, a cellular phone service provided by Vodafone New Zealand. ...


In the United States, a promissory note that meets certain conditions is a negotiable instrument governed by Article 3 of the Uniform Commercial Code. Negotiable promissory notes are used extensively in combination with mortgages in the financing of real estate transactions. Other uses of promissory notes include the capitalization of corporate finances through the issuance and transfer of commercial paper. A negotiable instrument is a specialized type of contract which obligates a party to pay a certain sum of money on specified terms. ... The Uniform Commercial Code (UCC) is one of the uniform acts that has been promulgated in attempts to harmonize the law of sales and other commercial transactions in the fifty state in the United States of America. ... A mortgage is a method of using property (real or personal) as security for the payment of a debt. ... Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings. ... Commercial paper is a money market security issued by large banks and corporations. ...


At various times in history promissory notes have acted as a form of privately issued currency. In many jurisdictions today, bearer negotiable promissory notes are illegal precisely because they can act as an alternative currency. Conversely, however, all Scottish banknotes are effectively standardised demand promissory notes, although they are rarely cashed. British banknotes are the banknotes of the United Kingdom and British Islands, denominated in pounds sterling (GBP). ...


See also

A negotiable instrument is a specialized type of contract which obligates a party to pay a certain sum of money on specified terms. ... In finance, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. ... Credit cards A credit card system is a type of retail transaction settlement and credit system, named after the small plastic card issued to users of the system. ... Student loans are loans offered to students to assist in payment of the costs of professional education. ... The United States Federal Government created the Federal National Mortgage Association (FNMA) (NYSE: FNM), commonly known as Fannie Mae, in 1938 to establish a secondary market for mortgages insured by the Federal Housing Administration (FHA). ...

External links

  • Nolo.com - Understanding Promissory Notes

  Results from FactBites:
 
Promissory note - Wikipedia, the free encyclopedia (269 words)
A promissory note is a contract detailing the terms of a promise by one party (the maker) to pay a sum of money to the other (the payee).
A promissory note differs from an IOU in that the latter is a simple acknowledgement of the existence of a debt owed, whereas a promissory note, as its name implies, contains an affirmative undertaking to pay the amount stated.
In the United States, a promissory note that meets certain conditions is a negotiable instrument governed by Article 3 of the Uniform Commercial Code.
  More results at FactBites »

 
 

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