In law, a promissory note is a contract that involves an unconditional promise by one party (the maker) to pay money to another party (the payee), according to the terms of the agreement. The promissory note may be related to credit, such as a mortgage loan, or to a debt. In addition to documenting principal and perhaps interest to be paid, the promissory note may include a default clause. The default clause of a promissory note will state payee rights in the event the maker defaults. The promissory note is used very commonly in real estate finance and in the issuance of commercial paper. The promissory note is often a negotiable instrument. A promissory note may simply be called a note.
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This glossary post was last updated: 29th March, 2024.
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