Promissory note: what makes the promise actually enforceable

A promissory note is a written, signed promise by one party to pay a definite sum of money to another, either on demand or at a fixed future date. It is not a contract in the ordinary sense — there is only one promise, running one way. That asymmetry is exactly why it is used: the maker owes, the payee is owed, and nothing else needs to be proved.

The document turns up in far more places than personal lending. A shareholder lending money into their own company, a buyer paying part of a purchase price over time, an employer advancing relocation costs, a supplier converting an overdue balance into scheduled payments — all of these are ordinarily documented with a note rather than a full loan agreement.

What a promissory note must contain

• The principal: a definite sum, in words and figures, with the currency stated.
• The parties: maker (who pays) and payee (who is paid), identified well enough to be sued.
• The promise itself — unconditional. Any condition on payment can take the note outside the rules that make it easy to enforce.
• When payment is due: a fixed date, a schedule, or on demand.
• Interest, if any: the rate, how it accrues, and whether it survives default.
• Date and place of issue.
• The maker’s signature.

The word unconditional carries most of the weight. "I promise to pay $10,000 on 1 March" is a note. "I promise to pay $10,000 once the project is accepted" is a contract term, and enforcing it means proving the project was accepted. Templates that add conditions to sound fair usually destroy the one property that made the note worth using.

Secured and unsecured

An unsecured note is a promise and nothing more: if the maker does not pay, the payee sues and joins the queue of ordinary creditors. A secured note is backed by specific property, described in the note or in a separate security agreement, and the payee can look to that property first.

Security is not created by calling the note secured. It is created by a description of the collateral and, in most jurisdictions, by a public filing or registration that puts other creditors on notice. A note that says "secured by the borrower’s equipment" with no filing behind it is, in practice, unsecured.

A note payable "on demand" starts no clock until demand is made — which sounds convenient and often is not. Limitation periods, interest accrual and the borrower’s own accounting all behave differently for demand notes than for fixed-date notes. Choose deliberately, not by default.

Signing it so it holds up

1. Draft the note with the sum, the date and the payment terms filled in — never leave blanks to be completed later.
2. Decide interest explicitly, including the default rate, rather than leaving it silent.
3. Have the maker sign; a guarantor, if there is one, signs separately and knows they are guaranteeing.
4. Record the date and, where local practice expects it, a witness or notarisation.
5. Give the payee the executed original and keep a copy with the payment schedule.
6. Log every payment against the note as it is received, not at year end.

Because the signature is what makes a promissory note operative, the signing step deserves a trail rather than a scanned page. Ettex Signature records who signed, when, and from where, and keeps the executed note with its payment schedule — so a year later the question of what was signed does not depend on someone finding the right email attachment. The same applies to any e signature software: what matters is the evidence it keeps, not the ink effect on screen.

When the payments stop

A note is easier to enforce than most agreements precisely because the argument is narrow: here is the promise, here is the amount unpaid. Before that stage, the ordinary steps still apply — a written reminder of the missed instalment, a record of what was said, and a clear statement of what happens next. A payment reminder email sent on schedule resolves most defaults without anyone reaching for the note at all.