Question: When would I use a promissory note?Answer:
A promissory note is a negotiable instrument that sets out the terms under which one party (the issuer) agrees in writing to pay a set monetary sum to another party (the payee).
The repayment can be either on demand or on a specified future date.
A promissory note is generally a relatively simple, straight forward document, compared to a loan agreement which can contain some very complex clauses, terms and conditions and requires both parties to sign for it to be legal, valid and binding.
Only one party, the issuer, needs to sign a promissory note. Once the payee has signed and dated a promissory note, they have a legal obligation to make payment.
Using a promissory note can be a great option in circumstances where you don’t want to have to draft, negotiate and sign a complex loan agreement, but where you nevertheless want to make sure you have documentary evidence of the sum owed to or by you. Take a look at our sample promissory note or for a more information on promissory notes see here.