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PROMISSORY NOTE

Definition: An unconditional promise to pay a sum certain on a time certained in a written promise to pay money to another party. (Maker and payee)

A note has the folliwng features:

- Capable of negotiation by a holder of the note, by endorsement.

- No excuses for non-payment.

- Co-makers: Joint and several liability.

- No prepayment capability, unless specifically stated in the note.

- Usury statutes, which vary from state to state, may penalize the charging of excessive interest, however it is defined.

- No execution formalities are required other than signature of the maker.

Distinguish:

Demand note, payable when the holder demands.

Time note, payable anytime after a specific date or referred event.

Note for periodic payments (like car payments or house payments.) A periodic payment note usually will contain an acceleration clause making the entire unpaid balance due if any single payment is missed.. . Presentment is required for payment. Many notes contain a "choice of law" clause which is a selection of a court to enforce the note if unpaid. enerally, these will not favor the maker of the note.

Cancellation: When the note is paid, it is "cancelled" The holder cancells the note by noting that the note has been paid. The maker should get thenote back.

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GUARANTY, Guarantee

A guaranty of somebody's note by another must be in writing. No consideration is required and the guarantee does not mention consideration. Tje guaranty is unconditional!. Payee or holder needn't be concerned about relationship between the guarantor and the maker.

- payment guarantee: Holder of note can go directly to guarantor without presentment or failure.

- collection guarantee: payee/holder can only go to the guarantor after presentment, refusal, judgment, and failed attempt to collect from the maker. Insolvency is the key.