A promissory note is a legal agreement in which one party (issuer) promises to pay a specified sum of money to another party (payee) on a future date or on the payee’s demand should certain conditions be met.

Sometimes also referred to as a note payable, the promissory note is a debt instrument and would include material information such as:

• Date
• Legal names of people involved in the agreement
• Principal amount
• Interest rate if applicable
• Terms of repayment
• Maturity date if applicable

It is basically a promise put into writing with legal repercussions when the promises are not kept.

They are often used by investors when there is a lack of trust between parties.

The presence of a promissory note would act as an assurance that the other party would keep his promises to pay.

Enforcement however, can be problematic.