Outline four requirements of a promissory note
Requirements of a promissory note are;-
The Parties are the people or business entities involved in the transaction. Parties must be of legal age, sound mind and capable of entering into the agreement. For example, Joe cannot sell Jane’s car if he isn’t on the title and doesn’t have the legal power to do so such as a power of attorney. He isn’t capable of entering into the agreement. Include the parties’ legal names, addresses and general contact information.
The Promise defines exactly what is agreed upon. It is a promise to pay a specific sum of money by one party to another. The promise should include a definitive payoff date. Avoid alternatives to payment such as yardwork or housecleaning in lieu of payment. These only muddle the defined promise and make it difficult to enforce.
The Sum Certain shouldn’t be confused with the promise. The Sum Certain not only discusses the exact amount that will be paid but includes interest, appreciation and any penalties for failure to fulfill the promise in a timely manner. A mortgage includes a schedule of payments as part of its promissory note to clearly define what is owed when and how much is principal and how much is interest.
Signatures are required to make the document legal. Both parties need to sign since both parties are entering into an agreement.