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Promissory Note Law Questions

A written contract that is created to record a transaction in which money is borrowed from one party and given to another is known as a promissory note. This note usually lists all the details of the transaction including the loan terms, the rate of interest rate (if any), how the money is meant to be paid back, where the payments have to be done, and so on. The borrower then signs the promissory note and hands it over to the lender while retaining a copy of it for himself/herself. The note functions as proof of the loan as well as of the agreement to repay the money as per the conditions laid down.

Listed below are a few questions answered by business lawyers on issues related to promissory note laws.

I have a notarized promissory note that states a relative owes me money. If she doesn’t pay me back and I choose to take her to court, would I need the services of a lawyer?

It may be sensible to have a lawyer represent you. If you choose to sue due to a default in payment, you may be able to recover not only the amount owed to you in the first place but also your attorney’s fees.

An employer is insisting on applicants signing promissory notes that state they have to pay the employer for a 4-week training course that is a prerequisite to being hired. The amount has to be paid if the applicants are not hired or find work elsewhere. Can the employer insist on this?

Applicants can be bound to honor the note if they sign it. But since it’s out of their control whether they get hired or not, this doesn’t seem very fair. Applicants may want to report this to the Attorney General's office as this seems like fraud. It may be a situation in which the employer is selling training sessions.

I am going to have bariatric surgery and am funding it myself. As I don’t have property to lien and have weak credit, can a lawyer help me get a promissory note through the hospital that would guarantee payment on my part? This might convince the hospital to work with me.

The hospital's billing department should be able to take a promissory note for your payment. But, it is similar to a hospital's right to collect on your payment, because it can sell the bill to a debt collector exactly the way it can sell a promissory note.

Basically, unless you're offering some form of collateral to secure your note, the note becomes just another piece of paper to the hospital. So, if they aren't willing to go ahead with the surgery, an uncollateralized note doesn’t help your situation or improve your credit position.

If the borrower and lender agree, can a small corporation in Texas change the frequency of paying interest on a promissory note to two years instead of making the payment once a year?

This can be done with the approval of the board rather than the shareholders. The board of directors usually takes care of a corporation’s assets and affairs, while the shareholders approve fundamental changes such as amendments of the certificate of formation, mergers, sale of assets, and termination and winding up of the business. Since this is a small change to a pre-existing contract, it can be done with the approval of the board. So, if you have a meeting of the board of directors that is valid, have a quorum, and a majority of people attending the meeting vote for the change, it should be in agreement with Texas law. However, ensure that the minutes of the meeting are documented.

State law governs the requirements of how a promissory note must be signed. Laws regarding promissory notes vary from state to state. Some states need promissory notes to be witnessed, some require they be notarized, and still others do not require either. Certain promissory notes also take personal guarantees into account. In case the person borrowing the money is a corporation/individual who has a weak financial base, another person may be needed to sign the guarantee to promise that the loan will be paid off by them if the borrower defaults. They will then be bound by law to honor the note in the same way the original borrower would be.

Ask a Business Lawyer

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Law Pro, Attorney
Category: General
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Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
11688690
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Business Lawyers are online & ready to help you now

Law Pro
Attorney
Satisfied Customers: 1767
20 years experience in business law - sole proprietor, partnership, and corporations
Dimitry K., Esq.
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Satisfied Customers: 1495
Run my own successful business/contract law practice.
MShore Law
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Satisfied Customers: 1233
Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements

Recent Promissory Note Questions

  • I have had a cleaning business going for 6 months now I originally

    I have had a cleaning business going for 6 months now I originally had an investor who put money in and I gave her 20% on the llc. She also gave me 2 accounts that she owns 50% of. After she invested she wanted off the llc within 6 weeks of the company opening, and according to my accountant she took herself off the llc. (Which I didn't know she could do without my signature as well) I recieved a letter from her attorney for me to sign a promissory note for all the money to be paid back within a short period of time (which is completely unrealistic due to the fact that is a new company and I am not making money like that) I did not sign the document so because I didn't do that, she has fired the company from both of the accounts which brings in the only money and has withheld pay checks from the employees who have worked over 80 hours. She said she will not pay the money due to the employees till I sign the promissory note. And she is now threatening to take me to court. I do not know where I stand nor what to do? Please help!!
  • We are selling our business and I have a couple of questions.

    We are selling our business and I have a couple of questions. Our attorney sent us all the documents for the closing and of course he isn't working this weekend....now I have a couple of questions.
    The closing date is already typed in as Dec. 17, however, he left open the date of the Asset Purchase Agreement. Does that date need to be Dec 16th BEFORE the closing date, since our buyer will take over at 12:01 am on Dec. 17?
    We have to create three originals of the Asset Purchase Agreement/Escrow Agreement because our bank also wants their own original since they are serving as Escrow Agent. My question is this... on the back of all three of these agreements are all the Exhibits (Bill of Sale, Special Warranty Deed, Promissory Note and Security Agreement)...Do we as the seller and also the buyer have to sign and notarize all these "Exhibits" or just the "originals" of the exhibits?
  • I am in a lease with a third party who is not listed on the

    I am in a lease with a third party who is not listed on the property, where the mortgage company is suing the condo association and being the occupant of the property I am being sued by them. I pay my rent to a Person of which I have a signed lease and I need to know how to respond to this matter.
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