Promissory Note Legal Advice
- When you are writing a promissory note, also called a promise to pay, it must contain clear terms related to the agreement. The basic elements of the note are the amount that is being lent, the date of the agreement and the date that payment is due, the names of both parties involved and the purpose of the loan. The agreement must be signed by both parties. Sign the agreement in front of a notary and have a third party sign the agreement as a witness. This will give you additional proof that both parties expressly agreed to the arrangement in case of a dispute.
- The promissory note is considered to be an "unconditional" contract, which means that it is not subject to any other conditions outside of the agreement. The contract assumes that all other conditions have already been met.
- Whatever is written within the promissory note is what will be considered to be valid if the situation were to go to court. The judge will look at what is within the "four corners of the agreement" (also called "The Four Corners Rule"). You cannot sign a promissory note that says "I will pay $1,000" and then say to a judge that you verbally agreed that you would pay back $500 instead of the $1,000 in the written agreement. If the agreement still states $1,000 then that is what is owed. If you make any additional agreements with the other person in regards to the debt, it must be included in the promissory note or re-drafted and signed again by both parties if you want the new agreement to be upheld in a court of law.
- A promissary note can be an agreement to pay one lump sum or it can be set up as a payment arrangement. If you do set the agreement up for installments, be sure to write in clear details about what day payments are due, the amount of each payment, how many payments are required to satisfy the agreement and any interest being charged as a condition of the agreement. You are considered to be in breach of a promissory agreement if you miss payments or stop making payments completely.
