Contract Glossary
Promissory Note
Definition
A written, signed promise to pay a specific amount of money to a specific person or entity, either on demand or by a set date. It's the simplest form of a debt instrument — one party promises to pay, and the other holds the note.
In Practice
If a friend lends you $20,000 and you sign a promissory note, that note is their proof of the debt and its terms — interest rate, repayment schedule, what happens if you miss payments. Startups use convertible promissory notes to borrow money from early investors, with the debt converting to equity in a future funding round.
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Frequently asked questions about promissory note
Yes. It's a legally enforceable document. If the borrower doesn't pay, the lender can sue to collect. Promissory notes are governed by UCC Article 3 in the U.S. and similar legislation elsewhere. They don't typically need to be notarized, but having them witnessed or notarized strengthens enforcement.
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Create your contractThis content is for informational purposes only and does not constitute legal advice. For contracts with significant financial or legal implications, review by a qualified attorney is recommended.