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.
Minnesota Checklist — Items to Consider for Drafting a Promissory Note The state of Minnesota has specific requirements and considerations when drafting a promissory note. A promissory note is a legal document that establishes a written promise to repay a specific sum of money. Whether you are lending or borrowing funds, it is important to create a promissory note that complies with Minnesota law. Below is a comprehensive checklist of items to consider when drafting a promissory note in Minnesota: 1. Identify the Parties: Begin the promissory note by clearly identifying the parties involved. Include the full legal names and addresses of both the lender (also known as the payee) and the borrower (also known as the maker). 2. Loan Amount and Interest: Specify the exact amount of the loan, clearly indicating the principal amount. Additionally, state the applicable interest rate, whether it is a fixed rate or a variable one, and any special terms related to interest calculation or compounding. 3. Repayment Terms: Outline the repayment terms, including the due date or dates, frequency of payments (monthly, quarterly, etc.), and the total number of payments required. Also, specify any grace period or late payment penalties. 4. Collateral: If the promissory note is secured by collateral, describe the collateral with sufficient detail, clearly indicating the value and location. For example, if the borrower's car is being used as collateral, include the make, model, year, and vehicle identification number (VIN). 5. Default and Remedies: Clearly define what constitutes a default, such as missed payments or violation of other agreed-upon terms. Specify the actions that may be taken by the lender in case of default, including acceleration of the debt, foreclosure or repossession of collateral, or legal action. 6. Governing Law: State that the promissory note is governed by the laws of the state of Minnesota. This ensures that any disputes or legal actions will be resolved according to Minnesota state laws. 7. Signatures: Both the lender and the borrower must sign the promissory note. Use a notary public to witness and notarize the signatures for added legal validity. Types of Minnesota Checklist — Items to Consider for Drafting a Promissory Note: 1. Simple Promissory Note: This is the most basic type of promissory note, typically used for loans with straightforward terms and no collateral involved. 2. Secured Promissory Note: This type of promissory note includes collateral to secure the loan. It provides the lender with the right to claim the specified collateral if the borrower defaults. 3. Installment Promissory Note: This note requires the borrower to make regular installments of principal and interest until the loan is fully repaid. 4. Balloon Promissory Note: This note involves smaller periodic payments over the repayment term with a larger final payment, known as a balloon payment, at the end. 5. Demand Promissory Note: This note allows the lender to demand full repayment at any time. Ensure that you consult with an attorney specializing in Minnesota laws to ensure your promissory note conforms to state-specific regulations. This checklist covers the key elements to include in a promissory note in Minnesota, but it is always advisable to seek professional advice when drafting legal documents.
