We explain what a promissory note is, the requirements that must be met to issue one and a model of this accounting document.
What is a promissory note?
It is known as promissory note to an accounting document that contains an unconditional promise of payment by a debtor or subscriber, in favor of another person (beneficiary or creditor).
The same document specifies the amount that said payment will consist of, the specified term of weather which will be available to cancel the debt, and other similar conditions.
The name of this type of document comes from its initial line, which commonly begins with “I must and I will pay”, a voluntary declaration of obligations. In this it is also distinguished from the letter or loan document: in that a promissory note is drawn up and issued by the debtor himself, not by the beneficiary.
The origin of the promissory note dates back to medieval times, with the rise of the bourgeoisie and the capitalism early, as a form of loan document that allowed to disguise the collection of interest, an activity that Christian morality considered reprehensible.
The promissory note is delivered to the creditor and remains in his possession until the moment he comes forward to collect the debt. He will then receive the promised sum and deliver the document in exchange, which can only then be destroyed. It may also be the case that the creditor receives a partial sum of the amount owed, but then he can withhold the promissory note until the rest of the debt is paid.
Promissory note requirements
For a promissory note to be valid, it must comply with the following:
- Mention that it is a promissory note. The content of the document must expressly indicate that it is a promissory note, in the same language of the country in which it is signed and in a totally clear and legible manner.
- Unconditional promise of payment. A promissory note contains an unconditional promise of payment, that is, it makes an explicit obligation without extenuating circumstances, without conditions, which must be included in the document. It is not always necessary to emphasize it, simply that the payment does not present any form of conditioning.
- Name of the beneficiary and signature of the subscriber. The two parties involved, to whom the money is owed and the debtor, must be present on the document. The first with your full name specified, the second by signature and name at the end of the promissory note.
- Date and place of subscription. Every promissory note is signed in a place and at a time, and this must be recorded in the document in order to establish its relationship with the expiration date and with the legal framework that will protect it (that of the country where it is signed).
- Expiration date. The due date is the date the amount owed must be paid without delay. This date must be explicitly contained in the document.
- Transmissibility. The promissory note may be transmitted or endorsed to a third party, that is, to someone interested in "buying" the subscriber's debt. Said endorsement must be total and pure, without conditions, or in part.
Promissory note
The following may be a valid model of promissory note:
I WILL PAY AT VISTA in ARGENTINE PESOS
The amount of $ ________
[Place and date of signature]
I will pay unconditionally to citizen ___________, bearer of identity document number __________, or at your request the sum of [Amount in letters] Argentine pesos ($ [Amount in numbers]), for the same amount received to my satisfaction. This promissory note will accrue compensatory interest from, and including, the date of its signature until, but excluding, the date of its full cancellation on [expiration date]. Said interests will be calculated at a nominal annual rate of ______ percent (__%). This obligation under my charge must be paid in Argentine pesos for both capital and interest.
[Subscriber's name and signature]
[Identification number]