Make it Legal: Promissory Note
From LawDepot Law Library
When drafting a promissory note it is important to make sure that all of the requirements to ensure that your document will be legally binding have been met. This is especially true in the UK and Australia where the Consumer Credit Act and the Consumer Credit Code, respectively, may apply.
This article is intended to help you make sure that your LawDepot Promissory Note will be legally binding.
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United States & Canada
Does my promissory note need to be witnessed?
Generally, there is no need for the signing of your promissory note to be witnessed. Some jurisdictions, however, may require it. Even when it is not required, having an objective third party witness the signing of the note will provide better evidence when you need to enforce the repayment of the note.
Does my promissory note need to be notarized?
There is generally no requirement to have your promissory note notarized. However, in some jurisdictions it may be a requirement, depending on the nature of the note. Even when it is not required, having an objective third party (such as a notary public) witness the signing of the note will be better evidence when you need to enforce the repayment of the note.
United Kingdom
Will my promissory note be governed by the Consumer Credit Act?
Under certain circumstances, your promissory note may be governed by the Consumer Credit Act 1974 as amended by the 2006 act. The Consumer Credit Act will not affect your promissory note if:
- Your promissory note is a non-commercial agreement.
- Your promissory note was created for a business purpose and the promissory note is greater than £25,000.00.
- Your promissory note is for £30.00 or less.
If your promissory note is governed by the Consumer Credit Acts, you will need to make sure that your note complies with those acts and their regulations. This may include providing certain notices and other information, as well as providing the APR (Annual Percentage Rate). You should consult the consumer credit legislation for more information (see links provided below).
Does my promissory note need to be witnessed or notarized?
United Kingdom signing requirements are the same as those for the United States & Canada. Please see the United States & Canada section above for more information.
Australia
Does the Consumer Credit Code apply to my promissory note?
The Consumer Credit Code is a set of laws developed to standardise the credit practice in Australia. It will apply to your promissory note if:
- The borrower is a natural person ordinarily resident in Australia or a strata corporation formed in Australia; and
- The credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and
- A charge is or may be made for providing the credit; and
- The credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider.
Do I need to make any disclosures to the borrower before we enter into a promissory note?
If the Consumer Credit Code applies to your agreement, the lender cannot enter into a promissory note unless the lender has given the borrower:
- A pre-contractual statement setting out the matters required by Section 15 to be included in the contract document; and
- An information statement in the form required by the regulations of the borrower’s statutory rights and statutory obligations.
To access information on the requirements for the pre-contractual statement and/or the information statement, view the links below:
Does my promissory note need to be witnessed or notarized?
Australian signing requirements are the same as those for the United States & Canada. Please see the United States & Canada section above for more information.
