Simple Promissory Note Example

PROMISSORY NOTE (UNSECURED)

Document ID: PN-2024-001
Effective Date: [Date]
Version: 1.0
Governing Jurisdiction: State of [State], United States

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LEGAL COMPLIANCE NOTICE

This document constitutes a legal instrument. Laws governing negotiable instruments, interest rate caps (usury laws), and enforceability of promissory notes vary significantly by jurisdiction. This template is provided for informational purposes and does not constitute formal legal advice. Execution of this document may have significant tax and legal implications. Parties are strongly advised to consult with local legal counsel to ensure compliance with applicable state statutory requirements.

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1. PARTIES

This Promissory Note ("Note") is entered into by and between:

Borrower: [Borrower Full Legal Name], with a principal address at [Borrower Address] (“Borrower”).

Lender: [Lender Full Legal Name], with a principal address at [Lender Address] (“Lender”).

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2. PRINCIPAL SUM AND INTEREST

2.1 Principal Amount. For value received, the Borrower promises to pay to the order of the Lender the principal sum of [Amount in USD] USD (the “Principal”).

2.2 Interest. The Principal sum shall bear interest at a rate of [Percentage]% per annum, calculated on a 365-day year basis. Interest shall begin to accrue on the Effective Date and continue until the Principal is paid in full.

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3. PAYMENT TERMS

3.1 Repayment Schedule. The Borrower shall repay the Principal and all accrued interest in [Number of Installments] equal installments of [Installment Amount] USD, payable on the [Day] of each [Month/Quarter], beginning on [Start Date] and ending on [Maturity Date] (the “Maturity Date”).

3.2 Method of Payment. All payments shall be made in lawful currency of the United States of America by wire transfer to the account designated in writing by the Lender or by such other method as the parties may agree.

3.3 Prepayment. The Borrower reserves the right to prepay the outstanding Principal balance in whole or in part at any time without penalty. Any partial prepayment shall be applied first to accrued interest and then to the reduction of the Principal.

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4. DEFAULT AND ACCELERATION

4.1 Event of Default. An “Event of Default” shall occur if the Borrower fails to make any payment when due or if the Borrower becomes insolvent, files for bankruptcy, or undergoes liquidation.

4.2 Acceleration. Upon the occurrence of an Event of Default, the Lender may, at its option, declare the entire unpaid Principal balance and all accrued interest immediately due and payable, without notice or demand.

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5. GOVERNING LAW AND DISPUTE RESOLUTION

5.1 Governing Law. This Note shall be governed by, construed, and enforced in accordance with the laws of the State of [State], without regard to its conflict of law principles.

5.2 Arbitration. Any dispute, controversy, or claim arising out of or relating to this Note shall be settled by binding arbitration administered by the American Arbitration Association (AAA) in accordance with its Commercial Arbitration Rules. The seat of arbitration shall be [City, State].

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6. MISCELLANEOUS

6.1 Entire Agreement. This Note constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, oral or written.

6.2 Severability. If any provision of this Note is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.

6.3 Waivers. No waiver by the Lender of any breach of this Note shall be deemed a waiver of any subsequent breach.

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7. EXECUTION AND SIGNATURE BLOCKS

FOR [BORROWER NAME]:
Signature: _____________________________________
Printed Name: [Authorized Signatory Name]
Title: [Title / Role]
Date: [Date]

FOR [LENDER NAME]:
Signature: _____________________________________
Printed Name: [Authorized Signatory Name]
Title: [Title / Role]
Date: [Date]

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STEP-BY-STEP EXECUTION AND FILING GUIDE

1. Drafting: Utilize a document processor (e.g., Microsoft Word) to populate all bracketed fields ([...]). Ensure the [State] in both the Jurisdiction and Governing Law clauses is consistent.
2. Verification of Authority: If the Borrower or Lender is an entity (e.g., LLC, Corporation), ensure the signee has the corporate authority (Board Resolution or Operating Agreement power) to bind the entity to debt obligations.
3. Digital Execution: For audit-trail purposes, execute via a compliant platform such as DocuSign, Adobe Sign, or HelloSign. Ensure that "KBA" (Knowledge-Based Authentication) is enabled if the loan amount is significant.
4. Distribution: Provide a fully executed PDF copy to both parties immediately upon signing.
5. Record Retention: Retain the original signed instrument in a secure, fireproof, or encrypted digital archive for the duration of the repayment term plus the applicable statute of limitations for contract enforcement in your jurisdiction (typically 6–10 years).
6. Payment Tracking: Maintain a formal ledger (Excel or accounting software) to document every installment receipt, keeping the original Note as the primary evidence of the debt in the event of collection litigation.