Whether you're borrowing money or providing a loan to someone else, a Promissory Note is usually the best way to establish a record of the transaction and make sure that repayment terms, for example, are clear and fair.
However, an “IOU†is generally regarded as only an acknowledgment of a debt, not a promise to pay the debt. However, this form is a written promise to pay a debt.
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Generally, as long as the promissory note contains legally acceptable interest rates, the signatures of the two contracted parties, and are within the applicable Statute of Limitations, they can be upheld in a court of law.
With this in mind, the following terms are merely a recommendation for what one should include in their IOU contract:The lender's full name;The borrower's full name;The amount of money ($) borrowed;The due date for the borrowed money;The amount ($) the borrower will pay per month/week; and.More items...
Is an IOU a Legal Document? An IOU is a legal document that can be introduced in a court of lawthough whether or not it is binding is open to dispute. Some authorities feel an IOU isn't binding at all; it's merely the acknowledgement that a debt exists.
An IOU (abbreviated from the phrase "I owe you") is usually an informal document acknowledging debt. An IOU differs from a promissory note in that an IOU is not a negotiable instrument and does not specify repayment terms such as the time of repayment.
Technically, an IOU can simply show that a debt exists and not include any details about the due date, interest rate, or payment installments. Although an IOU note can document a promise to repay a loan, its informal nature makes it unclear whether an IOU is a legally binding contract in some cases.
An IOU is an informal documentsometimes handwrittenthat records the existence of a debt. Since it typically is not a formal written contract, it may not be as legally binding as other loan agreements, such as a conventional residential mortgage. Consider this example of an IOU in its most basic form.
Is an IOU a Legal Document? An IOU is a legal document that can be introduced in a court of lawthough whether or not it is binding is open to dispute. Some authorities feel an IOU isn't binding at all; it's merely the acknowledgement that a debt exists.
A promissory note is different from an I.O.U. because a promissory note says a person will pay the money back and lays out how and when it will be paid and other details. An I.O.U. just says that a person owes a debt to someone else.
Essentials of an IOUName of the debtor.Name of the creditor.Amount of money in question (written out in both words and numbers).When the debt will be repaid.If interest is to be charged until the debt is repaid, the details of how the interest is calculated should be spelled out.Signatures of both parties.More items...
