Another common negotiable instrument that you may also be familiar with is a promissory note, such as one you could sign to obtain a business loan or, possibly, to document an agreement to exchange property for money. Other common types of negotiable instruments include bills of exchange, promissory notes, money orders and certificates of deposit (CD). There are many types of tradable instruments. The most common include personal checks, traveler's checks, promissory notes, certificates of deposit, and money orders.
Promissory notes are used for a wide variety of purposes, including to create enforceable debts between private parties and as capital contributions to limited liability companies by LLC members. On the other hand, a promissory note you sign to apply for a federal student loan would be a promissory note, since the document promises to reimburse the government for the money borrowed for your education. Promissory notes are used for many reasons, such as creating debts between private parties that can be legally enforced and by members of a limited liability company (LLC) to make capital contributions to the business. A promissory note does not simply indicate that there is a debt, but it must also indicate the exact amount and terms for repayment.
Since the endorser has a responsibility to ensure that a promissory note has a good title, it is a very secure type of negotiable instrument. If you need help with a promissory note or tradable instrument, you can post your legal need on the UpCounsel marketplace. Both companies and individuals can use negotiable instruments, such as promissory notes, to finance purchases through loans. If you apply for a student loan or mortgage to pay for these large expenses, you'll likely sign a promissory note as part of the loan process.
Adair, PLLC offers experienced business advice and can help you with your promissory note concerns. While promissory notes are not as informal as a promissory note, which simply indicates that there is a debt, it is not as formal and rigid as a loan agreement, which is more detailed and lists the consequences if the promissory note and other effects are not paid. Usually used for a loan, a promissory note will specify an agreement where the debtor will have to repay a specific amount of money borrowed at a given time, plus any interest. Promissory notes primarily allow individuals or corporations to obtain financing from a source other than a bank or financial institution.
Like other negotiable instruments, promissory notes contain all information relevant to the pledge, such as the specified principal amount, interest rate, term duration, issue date, and payer signature. Promissory notes are subject to somewhat strict government regulations, since, if left unchecked, they could constitute private currency. One or more persons may be liable for the debt, and the promissory note may have a provision in which the debt must be repaid in full upon request.