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This document is a promissory note which can be used for repayment of simple loans or credit either between individuals or companies. It acts as an I.O.U. or signed letter confirming a debt and promising repayment.
The document can be tailored to allow for different repayment options including fixed instalments, repayment by a set date, repayment on demand or any other custom schedule of payments.
It can also provide for simple terms charging interest on the outstanding debt, or securing the debt where an item of property has been provided to be sold in the event that the borrower cannot repay.
This document should be used for short term, less complex loans or offers of credit for goods supplied. For more complex documents a full loan agreement should be used.
How the document is to be used
The document should be signed by the person or persons who are in debt and provided to the lender. The lender should keep the original safe, but it is advised to have copies so that all parties can be clear about the terms of the promise to repay.
If the document is being signed by a company, the company should have a manager, director or company secretary sign it, and should include at least two such signatures unless the company has only one person. Each signature should also be dated and outline the signors name and role in the company.
If the loan is to be repaid on demand, the lender should notify the borrower that payment is required in writing to the address specified in the document, and present the signed original document to the borrower. If the loan is to be paid by instalments or on a fixed date, the document should be presented as above if the loan is not repaid in time, or if any payments due are missed.
Finally, if an item of property is to be provided as security for the loan or credit, that item or documents concerning its title should be given to the lender with the document. It should be noted that if there are then any missed payments that item may be sold by the lender to recover the value of the loan or credit.
Any applicable law
A promissory note is a bill of exchange. Consequently the applicable law can be found in the Bills of Exchange Act 1882.
It is advised that consideration should also be had of s.6 of the Limitation Act 1980 which deals with the time limit within which any loan, including those which are acknowledged by a promissory note, can be enforced.
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