A promissory note is a written promise to pay a specific amount on a predetermined date or upon demand. Typically, promissory notes are drafted when providing services, lending monies, selling goods, or during other transactions when extending credit. A client who is unable to pay for the goods, service, loan, etc. may sign a promissory note. The note is an unconditional promise to pay the amount to you, the provider, lender, supplier. You may be seeking promissory note enforcement if your
A promissory note is a binding agreement, a contract to pay. And, as with any contract, there must be valid consideration for the note to be enforceable. For example, if someone loaned $50,000.00 and the borrower signs a promissory note for $50,000.00 at the time of the loan, the act of loaning the money is adequate “consideration.” If the underlying transaction offers valid consideration for the note, the note is prepared and executed properly. The note can be used as a binding contract, evidencing the maker’s promise to repay monies.
A valid promissory note serves as proof of a debt owed to the lender or holder of the note.
There are summary proceedings you can use to win a judgment if you have a valid promissory note and your client does not pay as per the agreed-upon terms.
A promissory note is breached when payment due, or properly demanded as per the terms of the note, is not received. If you want to enforce a breached promissory note, you must follow the terms agreed upon when making demands for payment. Sending improper notice can hinder any case brought by an attorney and prevent promissory note enforcement.
How to Enforce a Promissory Note
To enforce a promissory note, the holder must provide notice as is required per the note. If timely payment is not made by the borrower, the note holder can file an action to recover payment. Depending upon the amount owed and/or specified in the note, a summons and complaint may be filed with the court or a motion in lieu of complaint may be filed for an expedited judgment.
A promissory note may appear to be a valid promise to pay but in reality, may not fulfill the requirements under Uniform Commercial Code Article 3. Requirements generally include that:
- The note is given for valid consideration,
- The notice requirements have been properly met,
- The terms of interest are not excessive and not usurious,
- Any action to enforce the promissory note is brought within the proper statute of limitations,
- The party seeking enforcement has a legal right to do so.
A promissory note will not be enforceable if the requirements have not been met. If your promissory note is not enforceable, you will not be able to seek expedited judgment. You may, however, still have a right to proceed against the borrower. You will not be able to pursue any additional remedies such as attorneys and collection fees, interest in excess of the legal rate, and more.
Although the Uniform Commercial Code is recognized by all states, each state, including New York, has codified its own versions of the UCC with minor but distinct differences. To ensure your promissory note is enforceable, you should have an attorney who regularly handles such matters draft it for you.
If you are looking to enforce or draft a promissory note, contact Frank, Frank, Goldstein and Nager for a free consultation. We have the experience that pays.