case study on promissory notes

QuestionsAnswered.net

What's Your Question?

What Is a Case Study?

When you’re performing research as part of your job or for a school assignment, you’ll probably come across case studies that help you to learn more about the topic at hand. But what is a case study and why are they helpful? Read on to learn all about case studies.

Deep Dive into a Topic

At face value, a case study is a deep dive into a topic. Case studies can be found in many fields, particularly across the social sciences and medicine. When you conduct a case study, you create a body of research based on an inquiry and related data from analysis of a group, individual or controlled research environment.

As a researcher, you can benefit from the analysis of case studies similar to inquiries you’re currently studying. Researchers often rely on case studies to answer questions that basic information and standard diagnostics cannot address.

Study a Pattern

One of the main objectives of a case study is to find a pattern that answers whatever the initial inquiry seeks to find. This might be a question about why college students are prone to certain eating habits or what mental health problems afflict house fire survivors. The researcher then collects data, either through observation or data research, and starts connecting the dots to find underlying behaviors or impacts of the sample group’s behavior.

Gather Evidence

During the study period, the researcher gathers evidence to back the observed patterns and future claims that’ll be derived from the data. Since case studies are usually presented in the professional environment, it’s not enough to simply have a theory and observational notes to back up a claim. Instead, the researcher must provide evidence to support the body of study and the resulting conclusions.

Present Findings

As the study progresses, the researcher develops a solid case to present to peers or a governing body. Case study presentation is important because it legitimizes the body of research and opens the findings to a broader analysis that may end up drawing a conclusion that’s more true to the data than what one or two researchers might establish. The presentation might be formal or casual, depending on the case study itself.

Draw Conclusions

Once the body of research is established, it’s time to draw conclusions from the case study. As with all social sciences studies, conclusions from one researcher shouldn’t necessarily be taken as gospel, but they’re helpful for advancing the body of knowledge in a given field. For that purpose, they’re an invaluable way of gathering new material and presenting ideas that others in the field can learn from and expand upon.

MORE FROM QUESTIONSANSWERED.NET

• Search Menu
• Browse content in Arts and Humanities
• Browse content in Archaeology
• Anglo-Saxon and Medieval Archaeology
• Archaeological Methodology and Techniques
• Archaeology by Region
• Archaeology of Religion
• Archaeology of Trade and Exchange
• Biblical Archaeology
• Contemporary and Public Archaeology
• Environmental Archaeology
• Historical Archaeology
• History and Theory of Archaeology
• Industrial Archaeology
• Landscape Archaeology
• Mortuary Archaeology
• Prehistoric Archaeology
• Underwater Archaeology
• Zooarchaeology
• Browse content in Architecture
• Architectural Structure and Design
• History of Architecture
• Landscape Art and Architecture
• Theory of Architecture
• Browse content in Art
• Art Subjects and Themes
• Gender and Sexuality in Art
• History of Art
• Industrial and Commercial Art
• Theory of Art
• Biographical Studies
• Byzantine Studies
• Browse content in Classical Studies
• Classical History
• Classical Philosophy
• Classical Mythology
• Classical Literature
• Classical Reception
• Classical Art and Architecture
• Classical Oratory and Rhetoric
• Greek and Roman Epigraphy
• Greek and Roman Law
• Greek and Roman Papyrology
• Greek and Roman Archaeology
• Late Antiquity
• Religion in the Ancient World
• Social History
• Digital Humanities
• Browse content in History
• Colonialism and Imperialism
• Diplomatic History
• Environmental History
• Genealogy, Heraldry, Names, and Honours
• Genocide and Ethnic Cleansing
• Historical Geography
• History by Period
• History of Emotions
• History of Agriculture
• History of Education
• History of Gender and Sexuality
• Industrial History
• Intellectual History
• International History
• Labour History
• Legal and Constitutional History
• Local and Family History
• Maritime History
• Military History
• National Liberation and Post-Colonialism
• Oral History
• Political History
• Public History
• Regional and National History
• Revolutions and Rebellions
• Slavery and Abolition of Slavery
• Social and Cultural History
• Theory, Methods, and Historiography
• Urban History
• World History
• Browse content in Language Teaching and Learning
• Language Teaching Theory and Methods
• Browse content in Linguistics
• Applied Linguistics
• Cognitive Linguistics
• Computational Linguistics
• Forensic Linguistics
• Grammar, Syntax and Morphology
• Historical and Diachronic Linguistics
• History of English
• Language Acquisition
• Language Evolution
• Language Reference
• Language Variation
• Language Families
• Lexicography
• Linguistic Anthropology
• Linguistic Theories
• Linguistic Typology
• Phonetics and Phonology
• Psycholinguistics
• Sociolinguistics
• Translation and Interpretation
• Writing Systems
• Browse content in Literature
• Bibliography
• Children's Literature Studies
• Literary Studies (Asian)
• Literary Studies (European)
• Literary Studies (Eco-criticism)
• Literary Studies (Romanticism)
• Literary Studies (American)
• Literary Studies (Modernism)
• Literary Studies - World
• Literary Studies (1500 to 1800)
• Literary Studies (19th Century)
• Literary Studies (20th Century onwards)
• Literary Studies (African American Literature)
• Literary Studies (British and Irish)
• Literary Studies (Early and Medieval)
• Literary Studies (Fiction, Novelists, and Prose Writers)
• Literary Studies (Gender Studies)
• Literary Studies (Graphic Novels)
• Literary Studies (History of the Book)
• Literary Studies (Plays and Playwrights)
• Literary Studies (Poetry and Poets)
• Literary Studies (Postcolonial Literature)
• Literary Studies (Queer Studies)
• Literary Studies (Science Fiction)
• Literary Studies (Travel Literature)
• Literary Studies (War Literature)
• Literary Studies (Women's Writing)
• Literary Theory and Cultural Studies
• Mythology and Folklore
• Shakespeare Studies and Criticism
• Browse content in Media Studies
• Browse content in Music
• Applied Music
• Dance and Music
• Ethnomusicology
• Gender and Sexuality in Music
• Medicine and Music
• Music Cultures
• Music and Religion
• Music and Media
• Music and Culture
• Music Education and Pedagogy
• Music Theory and Analysis
• Musical Scores, Lyrics, and Libretti
• Musical Structures, Styles, and Techniques
• Musicology and Music History
• Performance Practice and Studies
• Race and Ethnicity in Music
• Sound Studies
• Browse content in Performing Arts
• Browse content in Philosophy
• Aesthetics and Philosophy of Art
• Epistemology
• Feminist Philosophy
• History of Western Philosophy
• Metaphysics
• Moral Philosophy
• Non-Western Philosophy
• Philosophy of Science
• Philosophy of Language
• Philosophy of Mind
• Philosophy of Perception
• Philosophy of Action
• Philosophy of Law
• Philosophy of Religion
• Philosophy of Mathematics and Logic
• Practical Ethics
• Social and Political Philosophy
• Browse content in Religion
• Biblical Studies
• Christianity
• East Asian Religions
• History of Religion
• Judaism and Jewish Studies
• Qumran Studies
• Religion and Education
• Religion and Health
• Religion and Politics
• Religion and Science
• Religion and Law
• Religion and Art, Literature, and Music
• Religious Studies
• Browse content in Society and Culture
• Cookery, Food, and Drink
• Cultural Studies
• Customs and Traditions
• Ethical Issues and Debates
• Hobbies, Games, Arts and Crafts
• Lifestyle, Home, and Garden
• Natural world, Country Life, and Pets
• Popular Beliefs and Controversial Knowledge
• Sports and Outdoor Recreation
• Technology and Society
• Travel and Holiday
• Visual Culture
• Browse content in Law
• Arbitration
• Browse content in Company and Commercial Law
• Commercial Law
• Company Law
• Browse content in Comparative Law
• Systems of Law
• Competition Law
• Browse content in Constitutional and Administrative Law
• Government Powers
• Judicial Review
• Local Government Law
• Military and Defence Law
• Parliamentary and Legislative Practice
• Contract Law
• Browse content in Criminal Law
• Criminal Procedure
• Criminal Evidence Law
• Sentencing and Punishment
• Employment and Labour Law
• Environment and Energy Law
• Browse content in Financial Law
• Banking Law
• Insolvency Law
• History of Law
• Human Rights and Immigration
• Intellectual Property Law
• Browse content in International Law
• Private International Law and Conflict of Laws
• Public International Law
• IT and Communications Law
• Jurisprudence and Philosophy of Law
• Law and Politics
• Law and Society
• Browse content in Legal System and Practice
• Courts and Procedure
• Legal Skills and Practice
• Primary Sources of Law
• Regulation of Legal Profession
• Medical and Healthcare Law
• Browse content in Policing
• Criminal Investigation and Detection
• Police and Security Services
• Police Procedure and Law
• Police Regional Planning
• Browse content in Property Law
• Personal Property Law
• Terrorism and National Security Law
• Browse content in Trusts Law
• Wills and Probate or Succession
• Browse content in Medicine and Health
• Browse content in Allied Health Professions
• Arts Therapies
• Clinical Science
• Dietetics and Nutrition
• Occupational Therapy
• Operating Department Practice
• Physiotherapy
• Radiography
• Speech and Language Therapy
• Browse content in Anaesthetics
• General Anaesthesia
• Neuroanaesthesia
• Browse content in Clinical Medicine
• Acute Medicine
• Cardiovascular Medicine
• Clinical Genetics
• Clinical Pharmacology and Therapeutics
• Dermatology
• Endocrinology and Diabetes
• Gastroenterology
• Genito-urinary Medicine
• Geriatric Medicine
• Infectious Diseases
• Medical Toxicology
• Medical Oncology
• Pain Medicine
• Palliative Medicine
• Rehabilitation Medicine
• Respiratory Medicine and Pulmonology
• Rheumatology
• Sleep Medicine
• Sports and Exercise Medicine
• Clinical Neuroscience
• Community Medical Services
• Critical Care
• Emergency Medicine
• Forensic Medicine
• Haematology
• History of Medicine
• Browse content in Medical Dentistry
• Oral and Maxillofacial Surgery
• Paediatric Dentistry
• Restorative Dentistry and Orthodontics
• Surgical Dentistry
• Browse content in Medical Skills
• Clinical Skills
• Communication Skills
• Nursing Skills
• Surgical Skills
• Medical Ethics
• Medical Statistics and Methodology
• Browse content in Neurology
• Clinical Neurophysiology
• Neuropathology
• Nursing Studies
• Browse content in Obstetrics and Gynaecology
• Gynaecology
• Occupational Medicine
• Ophthalmology
• Otolaryngology (ENT)
• Browse content in Paediatrics
• Neonatology
• Browse content in Pathology
• Chemical Pathology
• Clinical Cytogenetics and Molecular Genetics
• Histopathology
• Medical Microbiology and Virology
• Patient Education and Information
• Browse content in Pharmacology
• Psychopharmacology
• Browse content in Popular Health
• Caring for Others
• Complementary and Alternative Medicine
• Browse content in Preclinical Medicine
• Molecular Biology and Genetics
• Reproduction, Growth and Development
• Primary Care
• Professional Development in Medicine
• Browse content in Psychiatry
• Addiction Medicine
• Child and Adolescent Psychiatry
• Forensic Psychiatry
• Learning Disabilities
• Old Age Psychiatry
• Psychotherapy
• Browse content in Public Health and Epidemiology
• Epidemiology
• Public Health
• Browse content in Radiology
• Clinical Radiology
• Interventional Radiology
• Nuclear Medicine
• Radiation Oncology
• Reproductive Medicine
• Browse content in Surgery
• Cardiothoracic Surgery
• Critical Care Surgery
• Gastro-intestinal and Colorectal Surgery
• General Surgery
• Neurosurgery
• Paediatric Surgery
• Peri-operative Care
• Plastic and Reconstructive Surgery
• Surgical Oncology
• Transplant Surgery
• Trauma and Orthopaedic Surgery
• Vascular Surgery
• Browse content in Science and Mathematics
• Browse content in Biological Sciences
• Aquatic Biology
• Biochemistry
• Bioinformatics and Computational Biology
• Developmental Biology
• Ecology and Conservation
• Evolutionary Biology
• Genetics and Genomics
• Microbiology
• Molecular and Cell Biology
• Natural History
• Plant Sciences and Forestry
• Research Methods in Life Sciences
• Structural Biology
• Study and Communication Skills in Life Sciences
• Systems Biology
• Zoology and Animal Sciences
• Browse content in Chemistry
• Analytical Chemistry
• Computational Chemistry
• Crystallography
• Environmental Chemistry
• Industrial Chemistry
• Inorganic Chemistry
• Materials Chemistry
• Medicinal Chemistry
• Mineralogy and Gems
• Organic Chemistry
• Physical Chemistry
• Polymer Chemistry
• Study and Communication Skills in Chemistry
• Theoretical Chemistry
• Browse content in Computer Science
• Artificial Intelligence
• Audio Processing
• Computer Architecture and Logic Design
• Game Studies
• Human-Computer Interaction
• Mathematical Theory of Computation
• Programming Languages
• Software Engineering
• Systems Analysis and Design
• Virtual Reality
• Browse content in Computing
• Business Applications
• Computer Security
• Computer Games
• Computer Networking and Communications
• Digital Lifestyle
• Operating Systems
• Browse content in Earth Sciences and Geography
• Atmospheric Sciences
• Environmental Geography
• Geology and the Lithosphere
• Maps and Map-making
• Meteorology and Climatology
• Oceanography and Hydrology
• Palaeontology
• Physical Geography and Topography
• Regional Geography
• Soil Science
• Urban Geography
• Browse content in Engineering and Technology
• Agriculture and Farming
• Biological Engineering
• Civil Engineering, Surveying, and Building
• Energy Technology
• Engineering (General)
• Environmental Science, Engineering, and Technology
• History of Engineering and Technology
• Mechanical Engineering and Materials
• Technology of Industrial Chemistry
• Transport Technology and Trades
• Browse content in Environmental Science
• Applied Ecology (Environmental Science)
• Conservation of the Environment (Environmental Science)
• Environmental Sustainability
• Environmentalist and Conservationist Organizations (Environmental Science)
• Environmentalist Thought and Ideology (Environmental Science)
• Management of Land and Natural Resources (Environmental Science)
• Natural Disasters (Environmental Science)
• Nuclear Issues (Environmental Science)
• Pollution and Threats to the Environment (Environmental Science)
• Social Impact of Environmental Issues (Environmental Science)
• History of Science and Technology
• Browse content in Materials Science
• Browse content in Mathematics
• Applied Mathematics
• Biomathematics and Statistics
• History of Mathematics
• Mathematical Education
• Mathematical Finance
• Mathematical Analysis
• Numerical and Computational Mathematics
• Probability and Statistics
• Pure Mathematics
• Network Science
• Browse content in Neuroscience
• Cognition and Behavioural Neuroscience
• Development of the Nervous System
• Disorders of the Nervous System
• History of Neuroscience
• Invertebrate Neurobiology
• Molecular and Cellular Systems
• Neuroendocrinology and Autonomic Nervous System
• Neuroscientific Techniques
• Sensory and Motor Systems
• Browse content in Physics
• Astronomy and Astrophysics
• Atomic, Molecular, and Optical Physics
• Biological and Medical Physics
• Classical Mechanics
• Computational Physics
• Condensed Matter Physics
• Electromagnetism, Optics, and Acoustics
• History of Physics
• Mathematical and Statistical Physics
• Measurement Science
• Nuclear Physics
• Particles and Fields
• Plasma Physics
• Quantum Physics
• Relativity and Gravitation
• Semiconductor and Mesoscopic Physics
• Browse content in Psychology
• Affective Sciences
• Clinical Psychology
• Cognitive Psychology
• Cognitive Neuroscience
• Criminal and Forensic Psychology
• Developmental Psychology
• Educational Psychology
• Evolutionary Psychology
• Health Psychology
• History and Systems in Psychology
• Music Psychology
• Neuropsychology
• Organizational Psychology
• Psychological Assessment and Testing
• Psychology of Human-Technology Interaction
• Psychology Professional Development and Training
• Research Methods in Psychology
• Social Psychology
• Browse content in Social Sciences
• Browse content in Anthropology
• Anthropology of Religion
• Human Evolution
• Medical Anthropology
• Physical Anthropology
• Political and Economic Anthropology
• Regional Anthropology
• Social and Cultural Anthropology
• Theory and Practice of Anthropology
• Browse content in Business and Management
• Business Strategy
• Business Ethics
• Business History
• Business and Government
• Business and Technology
• Business and the Environment
• Comparative Management
• Corporate Governance
• Corporate Social Responsibility
• Entrepreneurship
• Health Management
• Human Resource Management
• Industrial and Employment Relations
• Industry Studies
• Information and Communication Technologies
• International Business
• Knowledge Management
• Management and Management Techniques
• Operations Management
• Organizational Theory and Behaviour
• Pensions and Pension Management
• Public and Nonprofit Management
• Social Issues in Business and Management
• Strategic Management
• Supply Chain Management
• Browse content in Criminology and Criminal Justice
• Criminal Justice
• Criminology
• Forms of Crime
• International and Comparative Criminology
• Youth Violence and Juvenile Justice
• Development Studies
• Browse content in Economics
• Agricultural, Environmental, and Natural Resource Economics
• Asian Economics
• Behavioural Finance
• Behavioural Economics and Neuroeconomics
• Econometrics and Mathematical Economics
• Economic Systems
• Economic History
• Economic Methodology
• Economic Development and Growth
• Financial Markets
• Financial Institutions and Services
• General Economics and Teaching
• Health, Education, and Welfare
• History of Economic Thought
• International Economics
• Labour and Demographic Economics
• Law and Economics
• Macroeconomics and Monetary Economics
• Microeconomics
• Philosophy of Economics
• Public Economics
• Urban, Rural, and Regional Economics
• Welfare Economics
• Browse content in Education
• Adult Education and Continuous Learning
• Care and Counselling of Students
• Early Childhood and Elementary Education
• Educational Equipment and Technology
• Educational Strategies and Policy
• Higher and Further Education
• Organization and Management of Education
• Philosophy and Theory of Education
• Schools Studies
• Secondary Education
• Teaching of a Specific Subject
• Teaching of Specific Groups and Special Educational Needs
• Teaching Skills and Techniques
• Browse content in Environment
• Climate Change
• Conservation of the Environment (Social Science)
• Environmentalist Thought and Ideology (Social Science)
• Natural Disasters (Environment)
• Pollution and Threats to the Environment (Social Science)
• Social Impact of Environmental Issues (Social Science)
• Browse content in Human Geography
• Cultural Geography
• Economic Geography
• Political Geography
• Browse content in Interdisciplinary Studies
• Communication Studies
• Museums, Libraries, and Information Sciences
• Browse content in Politics
• African Politics
• Asian Politics
• Chinese Politics
• Comparative Politics
• Conflict Politics
• Elections and Electoral Studies
• Environmental Politics
• European Union
• Foreign Policy
• Gender and Politics
• Human Rights and Politics
• Indian Politics
• International Relations
• International Organization (Politics)
• International Political Economy
• Irish Politics
• Latin American Politics
• Middle Eastern Politics
• Political Methodology
• Political Communication
• Political Philosophy
• Political Sociology
• Political Behaviour
• Political Economy
• Political Institutions
• Political Theory
• Politics and Law
• Public Administration
• Public Policy
• Quantitative Political Methodology
• Regional Political Studies
• Russian Politics
• Security Studies
• State and Local Government
• UK Politics
• US Politics
• Browse content in Regional and Area Studies
• African Studies
• Asian Studies
• Japanese Studies
• Latin American Studies
• Middle Eastern Studies
• Native American Studies
• Scottish Studies
• Browse content in Research and Information
• Research Methods
• Browse content in Social Work
• Addictions and Substance Misuse
• Adoption and Fostering
• Care of the Elderly
• Child and Adolescent Social Work
• Couple and Family Social Work
• Developmental and Physical Disabilities Social Work
• Direct Practice and Clinical Social Work
• Emergency Services
• Human Behaviour and the Social Environment
• International and Global Issues in Social Work
• Mental and Behavioural Health
• Social Justice and Human Rights
• Social Policy and Advocacy
• Social Work and Crime and Justice
• Social Work Macro Practice
• Social Work Practice Settings
• Social Work Research and Evidence-based Practice
• Welfare and Benefit Systems
• Browse content in Sociology
• Childhood Studies
• Community Development
• Comparative and Historical Sociology
• Economic Sociology
• Gender and Sexuality
• Gerontology and Ageing
• Health, Illness, and Medicine
• Marriage and the Family
• Migration Studies
• Occupations, Professions, and Work
• Organizations
• Population and Demography
• Race and Ethnicity
• Social Theory
• Social Movements and Social Change
• Social Research and Statistics
• Social Stratification, Inequality, and Mobility
• Sociology of Religion
• Sociology of Education
• Sport and Leisure
• Urban and Rural Studies
• Browse content in Warfare and Defence
• Defence Strategy, Planning, and Research
• Military Administration
• Military Life and Institutions
• Peace Studies and Conflict Resolution

• < Previous chapter
• Next chapter >

8 What Would a Modern Law of Promissory Notes Look Like?

• Published: December 2011
• Cite Icon Cite
• Permissions Icon Permissions

This chapter considers whether it makes sense to base the law of promissory notes on concepts of negotiable instruments law. The chapter shows that nothing of substance turns on the conclusion that a given writing is or is not an instrument governed by Article 3. It shows how doctrines that made sense in former times operate today only as an obstacle to reaching simple, just results. The chapter explores the relationship between the Article 3 rules on accommodation parties and the general law of suretyship, showing that much of Article 3 is nothing more than a remnant of history. The chapter shows that the law would be clearer and simpler if issues concerning notes were treated simply as part of the general law of contracts.

Signed in as

Institutional accounts.

• GoogleCrawler [DO NOT DELETE]
• Google Scholar Indexing

Personal account

• Sign in with email/username & password
• Get email alerts
• Save searches
• Purchase content
• Activate your purchase / trial code

Institutional access

• Sign in with a library card Sign in with username / password Recommend to your librarian
• Institutional account management
• Get help with access

Access to content on Oxford Academic is often provided through institutional subscriptions and purchases. If you are a member of an institution with an active account, you may be able to access content in one of the following ways:

IP based access

Typically, access is provided across an institutional network to a range of IP addresses. This authentication occurs automatically, and it is not possible to sign out of an IP authenticated account.

Sign in through your institution

Choose this option to get remote access when outside your institution. Shibboleth / Open Athens technology is used to provide single sign-on between your institution’s website and Oxford Academic.

• Click Sign in through your institution.
• Select your institution from the list provided, which will take you to your institution's website to sign in.
• When on the institution site, please use the credentials provided by your institution. Do not use an Oxford Academic personal account.
• Following successful sign in, you will be returned to Oxford Academic.

If your institution is not listed or you cannot sign in to your institution’s website, please contact your librarian or administrator.

Sign in with a library card

Enter your library card number to sign in. If you cannot sign in, please contact your librarian.

Society Members

Society member access to a journal is achieved in one of the following ways:

Sign in through society site

Many societies offer single sign-on between the society website and Oxford Academic. If you see ‘Sign in through society site’ in the sign in pane within a journal:

• Click Sign in through society site.
• When on the society site, please use the credentials provided by that society. Do not use an Oxford Academic personal account.

If you do not have a society account or have forgotten your username or password, please contact your society.

Sign in using a personal account

Some societies use Oxford Academic personal accounts to provide access to their members. See below.

A personal account can be used to get email alerts, save searches, purchase content, and activate subscriptions.

Some societies use Oxford Academic personal accounts to provide access to their members.

Viewing your signed in accounts

Click the account icon in the top right to:

• View your signed in personal account and access account management features.
• View the institutional accounts that are providing access.

Signed in but can't access content

Oxford Academic is home to a wide variety of products. The institutional subscription may not cover the content that you are trying to access. If you believe you should have access to that content, please contact your librarian.

For librarians and administrators, your personal account also provides access to institutional account management. Here you will find options to view and activate subscriptions, manage institutional settings and access options, access usage statistics, and more.

Our books are available by subscription or purchase to libraries and institutions.

• About Oxford Academic
• Publish journals with us
• University press partners
• What we publish
• New features  
• Open access
• Rights and permissions
• Accessibility
• Advertising
• Media enquiries
• Oxford University Press
• Oxford Languages
• University of Oxford

Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide

• Copyright © 2023 Oxford University Press
• Cookie settings
• Cookie policy
• Privacy policy
• Legal notice

This Feature Is Available To Subscribers Only

Sign In or Create an Account

This PDF is available to Subscribers Only

For full access to this pdf, sign in to an existing account, or purchase an annual subscription.

• Search Search Please fill out this field.

What Is a Promissory Note?

How promissory notes work.

• History of Promissory Notes
• What's Included

The Bottom Line

• Personal Finance

Promissory Note: What It Is, Different Types, and Pros and Cons

A promissory note is a written and signed promise to repay a sum of money in exchange for a loan or other financing. A promissory note typically contains all the terms involved, such as the principal debt amount, interest rate, maturity date, payment schedule, the date and place of issuance, and the issuer's signature.

Although financial institutions may issue them—for instance, you might be required to sign a promissory note to take out a small personal loan —promissory notes also allow companies and individuals to get financing from a non-bank source. This source can be an individual or a company willing to carry the note (and provide the financing) under the agreed-upon terms. In effect, promissory notes can enable anyone to be a lender.

Key Takeaways

• A promissory note is a financial instrument that contains a written promise by one party (the note's issuer or maker) to pay another party (the note's payee) a definite sum of money, either on demand or at a specified future date.
• A promissory note typically contains all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer's signature.
• In terms of their legal enforceability, promissory notes lie somewhere between the informality of an IOU and the rigidity of a loan contract.

Investopedia / Tara Anand

Promissory notes can lie between an IOU's informality and a loan contract's rigidity. An IOU merely acknowledges a debt and the amount one party owes another. A promissory note includes a promise to pay on demand or at a specified future date, and steps required for repayment (like the repayment schedule).

In its simplest form, a promissory note might be a written promise to repay a family member. State or federal securities entities may regulate more complicated promissory notes.

Typically, there are two parties to a promissory note: The promisor, also called the note's maker or issuer, promises to repay the amount borrowed. The promisee or payee is the person who gave the loan.

Secured vs. Unsecured Promissory Notes

A promissory note can be secured or unsecured. A secured promissory note describes the collateral—typically property—that secures the debt or amount borrowed. For example, if the borrower owns property, the lender can use the car as collateral until the debt is repaid. If the borrower doesn't repay the loan, the lender can take possession of the property.

An unsecured promissory note doesn't involve collateral. In this case, if the borrower doesn't repay the loan, the lender can try to use standard debt-collection procedures.

In either case, the lender holds the promissory note until the debt is repaid. Typically, those drafting a promissory note will consult with an attorney to make sure the note follows any state or federal laws around loans or investments.

A Brief History of Promissory Notes

Promissory notes have had an interesting history. At times, they have circulated as a form of alternate currency, free of government control. In some places, the official currency is in fact a form of promissory note called a demand note (one with no stated maturity date or fixed term, allowing the lender to decide when to demand payment).

Promissory notes and bills of exchange are governed by the 1930 Geneva Convention of Uniform Law on Bills of Exchange and Promissory Notes. Its rules also stipulate that the term "promissory note" should be inserted in the instrument's body and contain an unconditional promise to pay.

In the United States, promissory notes are often used in when getting a mortgage, student loan, or a loan from a friend or family member. They're also sometimes issued to corporate clients.

A promissory note is usually held by the party owed money; once the debt has been fully paid, the note must be canceled by the payee and returned to the issuer.

What's Included in a Promissory Note?

A promissory note should include all the details about a loan and the repayment terms. In addition to the names of the borrower and the lender, it may also include:

• Name and address of borrower and lender
• Maturity date
• Sum borrowed
• Payment schedule
• Interest rate and how interest is calculated
• Prepayments process
• Overdue payment interest charged
• Waivers, amendments, and governing law for the promissory note

Promissory Note Repayment

There are several different structures for repayment of a promissory note, but most involve repaying the principal plus interest. The interest rate can be fixed or variable and calculated daily, monthly, annually, or another way. In some states, interest rates may be capped by state law. A certified accountant and attorney can advise you on the tax or legal implications of the promissory note's repayment schedule.

Here are various repayment approaches for a promissory note:

• Installment note : The most familiar repayment approach is through installments, with the borrower making regular payments; the repayment schedule and interest payments can vary.
• Simple note: For smaller loans, borrowers might arrange a lump-sum repayment on a specified date, meaning that's when you'll repay the whole amount in the promissory note.
• Open-ended note : This promissory note allows you to draw on an operating or other loan over time and repay your draw plus interest by a specific date.
• Demand note : Sometimes, a promissory note may specify "on demand" repayment, meaning that the note must be repaid at the lender's request at any time.

Types of Promissory Notes

Student loan promissory notes.

Many people sign their first promissory notes as part of getting a student loan . Private lenders typically require students to sign promissory notes for each loan taken out.

Some schools allow federal student loan borrowers to sign a one-time master promissory note, allowing receipt of multiple loans for up to 10 years if the school certifies the student's continued eligibility.

Student loan promissory notes outline the student borrower's rights and responsibilities and the loan's conditions and terms. By signing a master promissory note for federal student loans , the student promises to repay the loan amounts plus interest and fees to the U.S. Department of Education.

The master promissory note also includes the student's personal contact and employment information and the names and contact info for the student's references.

Mortgage Promissory Notes

Homeowners usually consider their mortgage an obligation to repay the money they borrowed to buy their residence. But actually, the signed promissory note represents a promise to repay the mortgage or loan, along with the repayment terms.

Typically, the Note includes:

• Amount you owe
• Mortgage loan's interest rate
• Ways your interest rate can change, if you have an Adjustable Rate Mortgage (ARM)
• Payment dates
• Repayment length of time
• Where you send payments
• Consequences of not making monthly mortgage payments

The promissory note describes the debt's amount, interest rate, and late fees. A lender holds the promissory note until the mortgage loan is paid off. Unlike the mortgage or deed of trust , the promissory note is not entered into county land records.

Corporate Credit Promissory Notes

Promissory notes are commonly used in business as a means of short-term financing. For example, when a company sells products but hasn't yet collected payments, cash may run low, leaving the company unable to pay creditors. The company may ask creditors to accept a promissory note to be exchanged for cash after the company collects its accounts receivables .

Or the company may ask the bank for cash in exchange for a promissory note. Promissory notes offer companies a credit source after exhausting other options, like corporate loans or bond issues. A note issued by a company in this situation is at a higher risk of default than, say, a corporate bond. The corporate promissory note's interest rate will likely provide a greater return than a bond from the same company, as high risk means higher potential returns.

These notes must be registered with the government in the state where sold and with the Securities and Exchange Commission (SEC).

If the note is not registered, the investor has to analyze whether the company is capable of servicing the debt. Companies in dire straits may hire high- commission brokers to push unregistered notes on the public. If the company defaults, the investors' legal avenues may be somewhat limited.

Investing in Promissory Notes

Company or corporate promissory notes are rarely sold to the public. When they are, it is usually at the behest of a struggling company working through unscrupulous brokers who are willing to sell promissory notes that the company may not be able to honor.

Or the note may be part of a scam sold by life insurance agents or online or out-of-state investment advisors. Some sellers may know nothing about the investments' true origins—the notes may be for companies that don't exist. Notes promising "low risk, high yield" investments may lead to a type of fraud, according to the SEC.

Before investing in promissory notes, ensure all of the following are true:

• The person selling the "promissory notes" is licensed to sell securities 
• The company offering promissory notes is legitimate and can repay debts
• Promissory notes are properly registered the SEC, state securities regulator or legally exempt from registration
• If guaranteed or insured by a foreign insurance company, contact your state department of insurance to make sure the company can do business in the U.S.

Investing in promissory notes involves risk. These notes are only offered to corporate or sophisticated investors who can handle the risks and have the money needed to buy the note. To help minimize these risks, an investor must register the note or have it notarized so that the obligation is publicly recorded and legal.

What Does a Promissory Note Contain?

A form of debt instrument, a promissory note represents a written promise on the part of the issuer to pay back another party. A promissory note will include the agreed-upon terms between the two parties, such as the maturity date, principal, interest, and issuer’s signature. Essentially, a promissory note allows entities aside from financial institutions the ability to provide lending mechanisms to other entities.

What Is an Example of a Promissory Note?

One example of a promissory note is a corporate credit promissory note. For this type of promissory note, a company will be typically seeking a short-term loan. In the case of a growing startup that is low on cash as it expands its operations, terms of the agreement could state that the company pays back the loan once its accounts receivable are collected.

There are a number of other different types of promissory notes, including investment promissory notes, take-back mortgages, and student loan promissory notes. 

What Are the Pros and Cons of a Promissory Note?

A promissory note can be advantageous when an entity is unable to find a loan from a traditional lender, such as a bank. However, promissory notes can be much riskier because the lender does not have the means and scale of resources found within financial institutions. At the same time, legal issues could arise for both the issuer and payee in the event of default. Because of this, getting a promissory note notarized can be important.

A promissory note is a written promise by one party to make a payment of money at a date in the future. Although potentially issued by financial institutions, other organizations or individuals can use promissory notes to confirm the agreed terms of a loan. In short, a promissory note allows anyone to act as a lender. However, the average investor should be wary of and heavily research any sales pitches for promissory notes as an investment.

University of Vermont Extension. " Guide to Financing the Community Supported Farm ."

United Nations Treaty Collection. " 10.Convention Providing a Uniform Law for Bills of Exchange and Promissory Notes ."

Stanford University. " Simple Promissory Note (Small Business) ."

Ohio State University Extension Farm Office. " Financing the Farm ." page 3.

Ohio State University Extension Farm Office. " Financing the Farm ," p. 2-3.

FederalStudentAid. " Master Promissory Note (MPN) ."

CFPB. " Guide to Closing Forms ."

• State of Connecticut Department of Banking. " Promissory Note Scams ."

Investor.gov. " Promissory Notes ."

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.