Promissory Note

A promissory note is a written obligation to pay a recited amount of money on demand or within a specified time period of time. Because a promissory note by itself is an “unsecured” obligation to pay, they are commonly executed contemporaneously with other instruments such as a security agreement, stock pledge agreement or deed of trust. Terms in a promissory note include: a principal amount, interest rate, maturity date, default penalties, late fees, and acceleration clauses.

While a simple short term loan does not necessarily warrant retention of an attorney, VLF recommends that Houston businesses consult with an attorney if they want to “secure” a loan or otherwise ensure that they are not violating other laws such as usury, which renders promissory notes containing unreasonably high interest rates unenforceable.