A promissory note , sometimes referred to as note payable , is a legal instrument (more specifically, financial instruments and debt instruments), where one party ( maker or issuer pledge in writing to pay a specified amount to the other party (the payment receiver ), either in a definite or determined future date or at the request of the recipient payment, with certain conditions.
Video Promissory note
Overview
The terms of the record usually include the principal amount, the interest rate if any, the parties, the date, the terms of payment (which may include interest) and the due date. Sometimes, the terms include the rights of the payee in the event of default, which may include confiscation of the assets of the maker. For inter-individual loans, writing and signing promissory notes often plays a role for taxes and records. Promissory notes are usually unsafe.
Terminology
Notes are generally used in accounting (differentiated from trade payables) or generally only as "records", these are internationally defined by the Convention which provides uniform laws for exchange and promissory notes) , but regional variations exist. Banknotes are often referred to as promissory notes, because they are made by the bank and paid to the carrier upon request. Mortgage notes are another prominent example.
If the promissory note is unconditional and ready for sale, this is called a negotiable instrument.
Promissory notes requests are records that do not carry a specific due date, but because of a request from a lender. Usually the lender will only give the borrower notice a few days before the payment is due.
The promissory note can be used in conjunction with the security agreement. For example, a promissory note may be used in conjunction with a mortgage, which in this case is called a mortgage note.
Loan contract
In public speeches, other terms, such as "loan", "loan agreement", and "loan contract" can be used interchangeably with "promissory notes". The term "loan contract" is often used to describe a long and detailed contract.
Promissory notes are very similar to loans. Each is a legally binding contract to release unconditional amount specified within a certain period of time. However, the promissory note is generally less detailed and less rigid than the loan contract. For one thing, loan agreements often require repayment in installments, while promissory notes usually are not. In addition, the loan agreement usually includes the requirement to seek redress in case of default, such as establishing the right to close, while the promissory notes.
Difference from IOU
The promissory note is different from the IOU as it contains a special promise to pay along the steps and terms of payment as well as the consequences if the payment fails. IOU only recognizes that there is debt.
Negotiation
Negotiated instruments are unconditional and only impose little to no assignment on publishers or payees other than payment. In the United States, whether a promissory note is a negotiable instrument can have a significant legal effect, as only negotiable instruments are subject to Article 3 of the Uniform Commercial Code and the application of its holder under reasonable rules. Negotiations on mortgage notes have been debated, mainly due to obligations and "baggage" associated with the mortgage; However, in the mortgage record is often determined to be an instrument of negotiation.
In the United States, No Promotional Note No Promotion Nothing is required.
Use as a financial instrument
Promissory notes are common financial instruments in many jurisdictions, which are used primarily for short-term financing. Often, sellers or service providers are not paid in advance by the buyer (usually, other companies), but within a certain timeframe, the time period agreed by both the seller and the buyer. The reasons may vary; historically, many firms are used to balance their books and carry out payments and debts at the end of each week or month of taxes; any product purchased before that time will only be paid later. Depending on the jurisdiction, this deferred payment period may be governed by law; in countries such as France, Italy or Spain, typically ranging between 30 and 90 days after purchase.
When a company is involved in many such transactions, for example by providing services to many customers, all of which suspend their payments, it is likely that the company may have enough money whose own liquidity position (ie, the amount of cash it holds) is hampered, herself unable to honor their own debt, despite the fact that by the books, the company remains solvent. In such cases, the company has the option of requesting a short-term loan to the bank, or using other short-term financial arrangements to avoid bankruptcy. However, in jurisdictions where promissory notes are commonplace, companies (called payees or lenders ) may request one of the debtor (called the manufacturer >, borrower or payer ) to receive a promissory note, in which the manufacturer signs a legally binding agreement to honor the amount set forth in the promissory note usually, part or all of its debt) within an agreed period of time. The lender can then take a promissory note to a financial institution (usually a bank, though this may also be an individual, or another company), which will redeem a promissory note for cash; usually, promissory notes are cashed for the amount specified in the promissory note, minus any discount.
After the promissory note reaches maturity, the current holder (the bank) may execute it on the emitter of the note (debtor), which must pay the bank the promised amount in the note. If the manufacturer fails to pay, the bank remains entitled to go to the company that cashed in the promissory note, and requested payment. In the case of unsafe promissory notes, the lender receives a promissory note based solely on the manufacturer's ability to repay; if the manufacturer fails to pay, the lender must honor the debt to the bank. In the case of a guaranteed promissory note, the lender receives a promissory note based on the ability of the manufacturer to repay, but the note is secured by something of value; if the manufacturer fails to pay and the bank takes back the payment, the lender has the right to execute the security.
Use as personal money
Thus, promissory notes can serve as a form of personal money. In the past, especially during the 19th century, its wide and unregulated use was a major source of risk for banks and private investors, who often faced the bankruptcy of both debtors, or were only deceived by both.
Maps Promissory note
History
Historically, promissory notes act as a form of currency that is issued in private. Fly cash or feiqian is a promissory note used during the Tang dynasty (618 - 907). Money flies are regularly used by Chinese tea traders, and can be exchanged for hard currency in the provincial capital. The Chinese concept of promissory notes was introduced by Marco Polo to Europe. According to tradition, in 1325 a promissory letter was signed in Milan. However, according to a travel record of a visit to Prague in 960 by Ibrahim ibn Yaqub, small pieces of cloth were used as a means of trade, with these fabrics having set exchange rates versus silver. There is evidence of a promissory note issued in 1384 between Genoa and Barcelona, ​​even though the letters themselves are missing. The same thing happened to that issued in Valencia in 1371 by Bernat de Codinachs to Manuel d'EntenÃÆ'§a, a trader of Huesca (then part of the Crown of Aragon), totaling 100 florins. In all of these cases, the promissory note is used as the base system of banknotes, since the issued amount can not be easily transported in metal coins between the cities involved. Ginaldo Giovanni Battista Strozzi issued an initial form of a promissory note at Medina del Campo (Spain), against the town of BesanÃÆ'§on in 1553. However, there were notices of promissory letters used in Mediterranean trade long before that date.
International law
In 1930, under the League of Nations, a Convention that provides uniform laws for exchange bills and promissory notes was drafted and ratified by eighteen states. Article 75 of the treaty states that the promissory note shall contain:
- the term " promissory note " is inserted into the body of the instrument and expressed in the language used in composing the instrument
- an unconditional promise to pay large sums of money;
- statement of payment time;
- statement where payment should be made;
- the name of the person receiving the payment of the order or who;
- statement of the date and place where the promissory note was issued;
- the signature of the person who issued the instrument (the manufacturer).
Worldwide
England and Wales
United States
In the United States, promissory notes that meet certain requirements are negotiable instruments regulated by article 3 of the Uniform Commercial Code. Negotiated promissory notes called mortgage notes are used extensively in combination with mortgages in financing real estate transactions. One outstanding example is the standard contract form Fannie Mae Multistate Fixed-Rate Note 3200 model, which is available to the public. Promissory letters, or commercial papers, are also issued to provide capital to businesses. However, Promissory Notes acts as a Financial source for corporate creditors.
The various laws of the State of the Law of the Uniform Commercial Code specify what and what is not a promissory note, in section 3-104 (d):
Thus, writing containing such disclaimers eliminates such writing from the definition of a negotiable instrument, instead merely memorializing the contract.
See also
References
Source of the article : Wikipedia
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