Promissory Note Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Promissory Note, written in plain English, along with examples of how it is used.
What is Promissory Note?
n.A written promise made by oner person to another to pay certain amount of money on demand or at a specified time in the future.It can also give other details like interst amount, installment payments,penalties for late payments,provision for legal fees if legal action involved.
History and Meaning of Promissory Note
A promissory note is a written document, signed by the maker, containing a promise to pay a specific sum of money to a designated person or order, at a specified time in the future. The document can also include other terms such as the interest rate, payment schedule, and penalties for late payments or defaults. The concept of a promissory note dates back to ancient civilizations, where they were used as a means of credit and commerce.
In modern times, promissory notes are commonly used in commercial and financial transactions. They can be used to raise capital, provide financing for real estate purchases, and secure loans from banks and other financial institutions. However, promissory notes can also be used to create personal loans between individuals, such as family members or friends.
Examples of Promissory Note
John borrowed $10,000 from his friend Mary and signed a promissory note agreeing to repay the loan with interest over a period of 2 years.
ABC Corporation issued a promissory note to raise capital for a new project, promising to pay investors a fixed interest rate over a 5-year period.
Juan purchased a car from Maria and signed a promissory note agreeing to make monthly payments of $500 until the amount of the loan plus interest was paid in full.
Legal Terms Similar to Promissory Note
Loan Agreement - A written agreement between a lender and borrower that outlines the terms and conditions of a loan.
Bond - A debt security that represents a promise to repay a fixed amount of money with interest at a future date.
Bill of Exchange - A written order, similar to a check, that obliges one party to pay a fixed amount of money to another party at a specified time in the future.