What Is A Negotiable Promissory Note Template
The negotiable promissory note is a document written by someone to another person for demanding payment. This is usually used to secure the transaction in real estate business. If you are still new in this matter, you can download our free promissory note template to learn how this works.
What Is The Difference Between The Negotiable Promissory Note and Non-negotiable Promissory Note?
- Negotiable instrument – The document will tide the person to guarantee the individual will pay a certain amount of money. This can be made for demand or with a certain time set. One of the examples is the banknotes, demand drafts, cheques and bills of exchanges.
- Non-negotiable Instrument – This document is created by an individual to another. This document is signed by the parties involved which indicates they agree with the terms stated in the document. The parties agree that they will pay to the beneficiary based on the demand or fixed time. However, not all promissory notes are negotiable because the terms “promissory” here is the “promise”.
What Are The Elements Of Promissory Notes?
There are some elements in the promissory notes, which are:
- There is no condition to be fulfilled regarding the prior payment
- This is a written document in which the party has promised to pay another party with a certain amount of money.
- The document should indicate the static amount for the principal and the interest is allowed to be variable. However, the amount of the interest should be reasonable.
- The phrases of “pay to the order of” along with the person’s name should be written.
- The document should be payable with a certain time frame or demand. For example, one week after the promissory note is released, the payment should be completed.
- The promissory note should be in the form of money. If the person is trying to pay with diamonds and gold, then the payment is not valid.
Why Is The Promissory Note Used?
- The use of promissory notes sometimes is for business or buying a real estate. For example, it is used for a mortgage. Later, the document will state the total amount, maturation date and the interest rate.
- The promissory note is made to have law power and stringent government regulations. If you look at it deeply, the paper money is the promissory note which the government bank will give the promise to the bearer to pay them in a certain amount.
- Meanwhile, the draft requires three parties. This includes the individual who writes the draft or checks, the drawee or bank, and then the person to whom the draft is payable.
- Note that the concept of negotiability here is signed by the person who writes it and it should contain promises. This includes the exact amount whether it is with or without interest.
That’s all our quick tips about the negotiable promissory notes. If you want a clear example, just download our templates for free on this page.
Sample Negotiable Promissory Note Template