A promissory note is a written promise to pay a debt. An unconditional promise to pay on demand or at a fixed or determined future time a particular sum of money to or to the order of a specified person or to the bearer.
Washington Checklist — Items to Consider for Drafting a Promissory Note A promissory note is a legal document that outlines a borrower's promise to repay a loan to a lender. Before drafting a promissory note in Washington, it is important to consider certain key items to ensure its enforceability and adherence to the relevant state laws. This checklist highlights the essential elements to include: 1. Identify the parties: Begin by clearly identifying the lender (creditor) and borrower (debtor) involved in the loan transaction. Include their full legal names, addresses, and any relevant company details. 2. Loan amount and terms: Specify the amount of money being borrowed and the terms of repayment, including the interest rate, due date, payment schedule (monthly, bi-monthly, etc.), and penalties for late payments. 3. Security and collateral: If the loan is secured by specific collateral, describe the collateral in detail and include this information in the promissory note. This ensures that in case of default, the lender has a legal claim on the collateral. 4. Default provisions: Clearly outline the consequences of defaulting on the loan, such as additional fees, increased interest rates, or legal action. Washington state laws may dictate the maximum interest rate allowed, so it is crucial to comply with these regulations. 5. Governing law and jurisdiction: Specify that the promissory note is subject to the laws of the state of Washington. Include the county or federal district where any potential legal disputes would be resolved. 6. Usury laws: Washington has usury laws that limit the amount of interest that can be charged on a loan. Ensure compliance with these laws by verifying the maximum allowable interest rate and including this information in the promissory note. 7. Acceleration clause: Consider including an acceleration clause, which allows the lender to demand immediate repayment of the loan if the borrower defaults. This clause provides additional protection for the lender. Types of Washington Checklists for Drafting a Promissory Note: 1. Simple promissory note checklist: This checklist covers the basic elements required for a straightforward promissory note in Washington. It includes the necessary parties, loan amount, terms, and default provisions. 2. Secured promissory note checklist: Suitable when the loan is secured by collateral. In addition to the elements listed in the simple promissory note checklist, this checklist focuses on describing the collateral, its value, and the process for enforcing the collateral in case of default. 3. Adjustable rate promissory note checklist: For loans with variable interest rates, this checklist includes additional sections specifying how the interest rate will be adjusted, when it will change, and how it will be determined. By carefully considering these items, you can create a comprehensive and enforceable promissory note that aligns with Washington state laws, protects both parties involved, and ensure a smooth borrowing process.
