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.
Maryland Checklist — Items to Consider for Drafting a Promissory Note When drafting a promissory note in Maryland, it is essential to consider several key items to ensure its legality and enforceability. Whether you are lending or borrowing money, understanding these elements will help protect your rights and avoid potential disputes. The following checklist covers the essential factors to consider while drafting a promissory note in Maryland: 1. Parties involved: Clearly identify the parties involved, including the lender (creditor) and the borrower (debtor). Include their legal names and addresses. 2. Principal amount and interest: Specify the principal amount being borrowed, which represents the initial loan amount. Additionally, mention the interest rate charged on the loan, if applicable. Maryland's law sets limits on the maximum interest rates, so ensure compliance. 3. Repayment terms: Set out the terms of repayment, including the repayment schedule, frequency (monthly, quarterly, etc.), and the due date for each payment. Consider including specifics on the acceptable methods of payment, such as checks or electronic transfers. 4. Late fees and penalties: Mention any penalties or late fees that will be charged for missed or late payments. Ensure that these fees are within Maryland's legal limits to avoid potential issues. 5. Security or collateral: If the loan is secured, describe the collateral or security interest being used to secure the debt. This could include personal or real property, such as a vehicle or real estate. Be sure to consult Maryland's laws on proper procedures for securing the debt. 6. Default and acceleration clauses: Specify the circumstances under which the borrower will be considered in default, such as missed payments or breach of other terms. Consider including an acceleration clause, allowing the lender to demand immediate repayment of the entire remaining balance upon default. 7. Governing law: Mention that the promissory note is subject to and governed by the laws of the State of Maryland. This provides clarity and helps resolve any legal disputes that may arise. 8. Signatures and notarization: Both parties should sign the promissory note to acknowledge their agreement to its terms. Although not required in Maryland, getting the document notarized adds an extra layer of authentication and can be beneficial if the agreement is ever challenged in court. It is worth noting that there can be different types of promissory notes in Maryland, depending on the specific purpose and terms. Some common types include real estate promissory notes, personal promissory notes, and business promissory notes. The checklist above applies to all types of promissory notes, ensuring a comprehensive approach to drafting a legally sound agreement. Remember, while this checklist covers the essential considerations for drafting a promissory note in Maryland, seeking legal advice from a qualified professional is always recommended ensuring compliance with Maryland's specific laws and regulations.
