(Last Updated On: April 27, 2021)

What is a Promissory Note?

A Promissory Note (also known as “note” or “negotiable instrument”) is a written statement that money is owed to you by the author (also known as “maker”) of the statement.  You can transfer the note to other people, who can then demand payment from the person or entity that owed money to you originally.  Your attorney might say  that  the note is “negotiable.”  Another benefit of a note:  You can enforce the note in court without further evidence of the underlying reason why money was owed to you in the first place.  You also don’t have to worry that the debtor will raise issues in court based on the underlying transaction since the court won’t consider any of those issues.

If you want to look up the code that governs promissory notes in New York, look here:
Article 3 New York Uniform Commercial Code.

Where do you encounter Promissory Notes?

Promissory notes are often given (“issued”) in the context of loans or other financings.  For example, when you buy a business, the seller may finance the purchase price by letting you pay in installments.  At the closing of the business sale, the seller will most likely demand a promissory note from you covering the outstanding amount of the purchase price of the business.  But whenever you lend money to a business partner, a friend, or any other person, it is a good idea to get a promissory note as security for the repayment.

How do you create a Promissory Note?

You need:

  • Something in writing from the debtor.
  • The writing must be signed by the debtor.  “Signed by the debtor” includes methods other than original signatures, such as email signatures, symbols, and so forth, as long as the debtor had the intention of signing the writing (see Section  1-201(37) New York Uniform Commercial Code).
  • The writing must state that your debtor unconditionally promises to pay you a certain amount of money at a certain time or upon demand by you.  Other than the promise to pay, there are very few other obligations by the debtor allowed in a promissory note.  If your debtor insists on inserting provisions beyond the  promise
    to pay on the promissory note, be sure to consult with your attorney.
  • Even though a promissory note is considered a contract, it does not require the signature of the creditor in order to be enforceable.

Example of a Promissory Note

A simple promissory note may look like this:

For value received, the undersigned, Bob Borrower, by this Promissory Note unconditionally promises to pay on July 1, 2024 to Leni Lender, the principal sum of THREE HUNDRED THOUSAND DOLLARS ($300,000).
This Promissory Note may be prepaid in whole or in part without penalty at any time.
The undersigned also promises to pay interest on the outstanding and unpaid principal amount of this Promissory Note, from the date hereof until repayment in full, at a rate per annum equal to five point five percent (5.5%), computed annually and payable in arrears upon the earlier of prepayment in full and maturity.
The undersigned hereby waives diligence, demand, protest, presentment, notice of dishonor or any other notice or demand whatsoever.
IN WITNESS WHEREOF, the undersigned has duly executed this Promissory Note as of April 27, 2021.

Bob Borrower


How do you enforce a Promissory Note?

The beauty of a promissory note is that you basically just need the piece of paper that constitutes the note.  You don’t need any further evidence.  The debtor cannot raise defenses based on the underlying transaction that was the reason for the note.

In addition, the law gives you an expedited way to get a judgment on your promissory note.  You would file a “notice of motion for summary judgment in lieu of complaint,” which gives you a much faster day in court than a regular complaint.  This motion would be accompanied by your affidavit and a copy of the note.  This is a simple action that should not cost you an arm and a leg, even if you have to hire an attorney to do it for you.

We charge flat fees for the enforcement of a promissory note in default.  Get in touch with us to find out if we can help you enforce your promissory note in default. 


About Imke Ratschko

Imke Ratschko is a New York Attorney helping small businesses, business owners and entrepreneurs with all things "Small Business Law," such as litigation, contracts, business owner disputes, shareholder and operating agreements, sale or purchase of a business, investors, and starting a business. You can reach her at 212.253.1027 or by email.

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