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.
Tennessee Checklist — Items to Consider for Drafting a Promissory Note When drafting a promissory note in Tennessee, it's essential to consider several key items to ensure its validity, enforceability, and protection for both the lender and the borrower. This checklist will guide you through the necessary points to consider. 1. Legal Requirements: Familiarize yourself with Tennessee's laws regarding promissory notes. Ensure compliance with the Tennessee Code Annotated (Title 47, Chapter 3) and any relevant state or federal regulations. 2. Identification of Parties: Clearly identify the parties involved, including full legal names, addresses, and contact information for both the lender (also known as the payee or holder) and the borrower (the maker). 3. Loan Amount and Repayment Terms: Clearly state the principal loan amount, specifying whether there will be any interest charged, and the repayment schedule. Include details about payment frequency (monthly, bi-monthly, etc.), due dates, and the duration of the loan. 4. Interest Rate: Determine the interest rate, whether it will be fixed or variable, and if variable, specify the reference rate and adjusting dates. 5. Late Payment Penalties: Establish penalties for late or missed payments, such as a percentage-based fee or flat-rate charges. Clearly outline the consequences for non-payment, including possible acceleration of the loan. 6. Security or Collateral: Specify if the loan is secured or unsecured. If secured, clearly describe the collateral being used to secure the loan, such as personal property (e.g., cars, real estate) or accounts receivable. 7. Default and Remedies: Clearly outline the events of default, such as non-payment, breach of terms, or bankruptcy. State the remedies available to the lender, such as acceleration of the loan, repossession of collateral, or legal action. 8. Governing Law and Venue: Specify that Tennessee law governs the promissory note and designate the county or district in which any legal disputes will be resolved. 9. Waiver of Rights: Include a clause stating that the lender's failure to enforce any rights or provisions of the promissory note shall not constitute a waiver of those rights in the future. 10. Signatures and Witnesses: Ensure the promissory note is signed by both the lender and the borrower, with their printed names and dates. If required, have the signatures witnessed or notarized for further authenticity. Types of Tennessee Checklist — Items to Consider for Drafting a Promissory Note: 1. Secured Promissory Note: When the loan is backed by collateral, this type of promissory note provides additional protection for the lender. 2. Unsecured Promissory Note: This type of promissory note does not require collateral and may be issued based solely on the borrower's creditworthiness. 3. Fixed-Rate Promissory Note: A promissory note with a fixed interest rate, providing the borrower with a predictable repayment plan. 4. Variable-Rate Promissory Note: This promissory note's interest rate fluctuates based on changes in an agreed-upon reference rate, such as the prime rate. By adhering to this Tennessee checklist and considering the various types of promissory notes available, you'll be able to draft a comprehensive and legally sound document that satisfies both parties involved in the loan agreement. Always consult with an attorney or legal professional experienced in Tennessee law to ensure accuracy and compliance with all applicable regulations.
