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.
Rhode Island Checklist: Items to Consider for Drafting a Promissory Note When drafting a promissory note in Rhode Island, it is essential to ensure that all necessary elements are included to make it legally binding and enforceable. Below is a detailed checklist of items to consider: 1. Parties involved: Clearly identify the lender (also known as the payee) and the borrower (the promise) by including their full legal names and addresses. 2. Date of the promissory note: Include the date on which the promissory note is created. This establishes when the borrower promises to repay the debt. 3. Principal amount: Specify the principal amount being borrowed. This is the initial amount lent to the borrower, excluding any interest or fees. 4. Interest rate: State the agreed-upon interest rate, if applicable. Rhode Island sets a maximum interest rate allowable by law. Make sure the stated interest rate complies with the state's usury laws. 5. Payments: Outline the payment schedule, including the frequency of payments (monthly, quarterly, etc.) and the due date for each payment. Specify where payments should be made and accepted forms of payment. 6. Late fees and penalties: Define the consequences for late or missed payments. Rhode Island allows the inclusion of late fees, but they must be reasonable and not excessive. 7. Collateral, if applicable: Is the promissory note is secured by collateral, describe the collateral in detail. Include information regarding its value and location. 8. Default and acceleration clauses: Define what constitutes a default and set forth the lender's rights and remedies in the event of default. Consider including an acceleration clause, allowing the lender to demand immediate payment of the entire principal balance if the borrower defaults. 9. Prepayment rights: Specify whether the borrower has the option to prepay the loan in full or in part without penalty. If prepayment penalties apply, describe them accordingly. 10. Governing law: State that the promissory note is governed by the laws of Rhode Island and any disputes will be resolved under its jurisdiction. 11. Signatures: Both the lender and the borrower must sign and date the promissory note. Consider including a section for witness signatures, although not required under Rhode Island law. Different Types of Rhode Island Checklists for Drafting Promissory Notes: — Rhode Island Personal Promissory Note: Used for lending money between individuals or within family and friends. — Rhode Island Business Promissory Note: Designed for business-related loans, where a company or organization lends money to another entity. — Rhode Island Secured Promissory Note: Involves the borrower securing the loan with collateral, providing additional security for the lender. — Rhode Island Unsecured Promissory Note: Does not require collateral, making it particularly useful for loans between trustful parties or small amounts. When creating a promissory note in Rhode Island, it is advisable to consult an attorney to ensure compliance with state laws and customize the agreement to specific loan terms and requirements.
