{"id":171904,"date":"2022-07-12T02:54:17","date_gmt":"2022-07-12T01:54:17","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=171904"},"modified":"2025-10-08T09:46:27","modified_gmt":"2025-10-08T08:46:27","slug":"promissory-note","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/commercial-contracts\/promissory-note\/","title":{"rendered":"What is a Promissory Note in the UK?"},"content":{"rendered":"\n<p>As a business owner, you may encounter a promissory note in certain types of agreements or as a standalone document. These commonly arise when a person or company unilaterally promise to pay a sum of money. In short, promissory notes are a formal legal document in which one party promises to pay another a sum of money. You may encounter a promissory note in certain types of agreements or as a standalone document. These notes typically arise when a person or company unilaterally promises to pay a sum of money. In short, a promissory note is a formal legal document in which one party agrees to pay another a specific sum of money. <\/p>\n\n\n\n<p>This article will elaborate on some of the key features and requirements of a promissory note. It will also cover when you can use one and key considerations to keep in mind when doing so.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is a Promissory Note?<\/h2>\n\n\n\n<p>A promissory note is an unconditional promise to pay a set sum of money. A specific set of terms will outline how and when the payment must be made.<\/p>\n\n\n\n<p>Historically, promissory notes developed before official banknotes were introduced. This is because they were more convenient than carrying around coins.&nbsp;<\/p>\n\n\n\n<div  class=\"box box--icon box--star\">\n    <p>Modern banknotes are structured in a similar way to promissory notes, and even bear words such as &#8216;I promise to pay the bearer the sum of&#8230;&#8217;.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Features and Requirements of a Promissory Note<\/h2>\n\n\n\n<p>To create a valid promissory note, your note must meet certain requirements as set out in section 83(1) of the <em><a href=\"https:\/\/www.legislation.gov.uk\/ukpga\/Vict\/45-46\/61\">Bills of Exchange Act 1882<\/a><\/em> (1882 Act). We will set out some of these conditions below.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Sum certain or loan amount<\/h3>\n\n\n\n<p>First, the promissory note must contain an unconditional promise for the payment of a \u2018sum certain in money\u2019. In practice, this means that the promissory note must specify a specific, certain, and clearly ascertainable amount of money, and that the sum must appear on the face of the note.&nbsp;<\/p>\n\n\n\n<p>Furthermore, the terms of the note could specify a payable amount with an interest rate, along with conditions for repayment at the agreed-upon intervals.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Negotiability<\/h3>\n\n\n\n<p>A promissory note must act as a \u2018negotiable instrument\u2019. This comes with two key implications, such that:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>ownership of the note can be transferred to someone else.. Transferring a note in this way is called \u2018negotiating\u2019 the note; and<\/li>\n\n\n\n<li>once transferred, the new holder has the same legal rights to payment as the original holder. This is the case provided that the note was not acquired with any defects of title. In other words, if it was acquired illegitimately, or the new holder is unaware of any defects of title, the above rights and obligations may not protect either party.&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>This means that a simple declaration that you owe another person (an IOU) is not necessarily a promissory note, because it may not be transferable in the same manner.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Must Be Unconditional <\/h3>\n\n\n\n<p>A promissory note must be unconditional. This means that if the note is subject to conditions (for example, if it contains the words &#8216;subject to delivery&#8217;), then it will not amount to a valid promissory note.&nbsp;It can, however, contain terms and conditions regarding the payment of the set amount. <\/p>\n\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2023\/05\/19033600\/Screen-Shot-2023-05-19-at-12.35.51-pm.png\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">Board Minutes - First Meeting of Directors<\/div>\n            <div class=\"body-text\">\n                <p>This template refers to the minutes of the first meeting of the directors of a Company.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/legalvision.co.uk\/documents\/board-minutes-first-meeting-directors\/\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h3 class=\"wp-block-heading\">Execution and Consideration<\/h3>\n\n\n\n<p>Finally, for a note to be legally valid, it must contain the signature of the person who is creating the promissory note (sometimes referred to as the note&#8217;s issuer). It does not, however, have to contain the signature of the note holder (sometimes referred to as the note&#8217;s payee).<\/p>\n\n\n\n<p>If there is no signature, the payee cannot bring <a href=\"https:\/\/legalvision.co.uk\/disputes-litigation\/how-do-i-enforce-a-payment-for-my-business\/\">legal action<\/a> against the issuer, who has agreed to pay the set amount. <\/p>\n\n\n\n<p>Further, courts assume promissory notes contain \u2018consideration\u2019. Consideration is a requirement in the general rules of contract law that each party has to give something of value to create a legally binding agreement. In the case of a promissory note, courts will assume consideration has been provided.<\/p>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+448081968584\" class=\"not-prose\">0808 196 8584<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left gform_input_bg_white    \">\n    <script>\nvar 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       } else {            triggerPostRender();        }    } );} );\n<\/script>\n<\/div>\n<\/div>\n<div id=\"content-next\"><!-- scroll anchor --><\/div>\n<h2 class=\"wp-block-heading\">When Can You Use a Promissory Note?<\/h2>\n\n\n\n<p>Some common modern uses of a promissory note include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>student loans;<\/li>\n\n\n\n<li><a href=\"https:\/\/legalvision.co.uk\/business-sale-purchase\/business-loan-considerations\/\">business loans<\/a>;<\/li>\n\n\n\n<li>real estate loans;<\/li>\n\n\n\n<li>lending between family or friends for large sums of money, or even for a lump sum to be paid at a later time;<\/li>\n\n\n\n<li>to charge interest on a loan, including on a personal loan; and<\/li>\n\n\n\n<li>to outline repayment terms as part of loan terms.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Other Features of a Promissory Note<\/h2>\n\n\n\n<p>Importantly, either party can amend a promissory note so long as the note&#8217;s issuer and payee (as well as any other relevant parties) all agree.&nbsp;<\/p>\n\n\n\n<p>Finally, the obligations under a note will also lapse at the note&#8217;s maturity date (in other words, when the amount under the note becomes payable).&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key Takeaways<\/h2>\n\n\n\n<p>As a business, you may wish to use a promissory note as a formal way of coming to an agreement with another party. Typically, business owners use promissory notes for certain types of loans. Promissory notes can also include interest rate terms.&nbsp;<\/p>\n\n\n\n<p>Promissory notes have a number of requirements to be valid. One of these is that the note must be &#8216;negotiable&#8217; &#8211; meaning that the note must be able to be transferable. As a result, a simple IOU will not amount to a promissory note for the purposes of the <em>Bills of Exchange Act 1882<\/em>, which governs UK law on promissory notes.<\/p>\n\n\n\n<p>If you have any further questions regarding promissory notes, our experienced <a href=\"https:\/\/legalvision.co.uk\/contract-lawyers-lp\/\">contract lawyers<\/a> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+448081968584\" class=\"AVANSERnumber dynamic-number\">0808 196 8584<\/a> or visit our<a href=\"https:\/\/legalvision.co.uk\/membership\"> membership page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently Asked Questions<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1657590258529\"><strong class=\"schema-faq-question\"><strong>What is a promissory note?<\/strong><\/strong> <p class=\"schema-faq-answer\">A promissory note is where one party agrees to pay another party a set amount of money under specific terms. A promissory note has a number of requirements.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1657590259760\"><strong class=\"schema-faq-question\"><strong>What is consideration?<\/strong><\/strong> <p class=\"schema-faq-answer\">Consideration is a requirement for contract formation in general UK contract law, and requires that both parties must exchange something of value.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1756390567847\"><strong class=\"schema-faq-question\">What is an IOU?<\/strong> <p class=\"schema-faq-answer\">An IOU is a simple note that says one person owes money to another. It typically displays the amount owed and the names of the individuals involved. It usually doesn\u2019t include detailed repayment terms, interest, or legal wording. <\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"9eb4f72322\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/171904\" \/>            <input value=\"https:\/\/legalvision.co.uk\/commercial-contracts\/promissory-note\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"What is a Promissory Note in the UK?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>As a business owner, you may encounter a promissory note in certain types of agreements or as a standalone document. These commonly arise when a person or company unilaterally promise to pay a sum of money. In short, promissory notes are a formal legal document in which one party promises to pay another a sum<a href=\"https:\/\/legalvision.co.uk\/commercial-contracts\/promissory-note\/\">Continue reading <span class=\"sr-only\">&#8220;What is a Promissory Note in the UK?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13458,"featured_media":3227,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"1783,1030,492,171768,3678,994","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[37],"tags":[174,508,820,859],"class_list":["post-171904","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-contracts","tag-commercial-contracts","tag-corporate","tag-commercial","tag-promissory-notes"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What is a Promissory Note? 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| LegalVision UK"},{"@type":"BreadcrumbList","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/promissory-note\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/legalvision.co.uk\/"},{"@type":"ListItem","position":2,"name":"Commercial Contract Articles","item":"https:\/\/legalvision.co.uk\/category\/commercial-contracts\/"},{"@type":"ListItem","position":3,"name":"What is a Promissory Note in the UK?"}]},{"@type":"WebSite","@id":"https:\/\/legalvision.co.uk\/#website","url":"https:\/\/legalvision.co.uk\/","name":"LegalVision UK","description":"LegalVision is a commercial law firm in the UK with a commitment to innovation","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/legalvision.co.uk\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-GB"},{"@type":"Person","@id":"https:\/\/legalvision.co.uk\/#\/schema\/person\/6bfeae4983ff2a2a487f1925d659dd03","name":"Malaikah Khattak","image":{"@type":"ImageObject","inLanguage":"en-GB","@id":"https:\/\/legalvision.co.uk\/#\/schema\/person\/image\/","url":"https:\/\/legalvision.co.uk\/wp-content\/uploads\/sites\/4\/2024\/04\/Malaikah-2534-scaled-e1714435302352-96x96.jpg","contentUrl":"https:\/\/legalvision.co.uk\/wp-content\/uploads\/sites\/4\/2024\/04\/Malaikah-2534-scaled-e1714435302352-96x96.jpg","caption":"Malaikah Khattak"},"description":"Malaikah is a Solicitor at LegalVision within the Corporate and Commercial team. She assists on a broad range of Commercial Contract matters, as well as Corporate matters.","url":"https:\/\/legalvision.co.uk\/author\/malaikahkhattak\/"},{"@type":"Question","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/promissory-note\/#faq-question-1657590258529","name":"What is a promissory note?","acceptedAnswer":{"@type":"Answer","text":"A promissory note is where one party agrees to pay another party a set amount of money under specific terms. A promissory note has a number of requirements.","inLanguage":"en-GB"},"inLanguage":"en-GB"},{"@type":"Question","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/promissory-note\/#faq-question-1657590259760","name":"What is consideration?","acceptedAnswer":{"@type":"Answer","text":"Consideration is a requirement for contract formation in general UK contract law, and requires that both parties must exchange something of value.","inLanguage":"en-GB"},"inLanguage":"en-GB"},{"@type":"Question","@id":"https:\/\/legalvision.co.uk\/commercial-contracts\/promissory-note\/#faq-question-1756390567847","name":"What is an IOU?","acceptedAnswer":{"@type":"Answer","text":"An IOU is a simple note that says one person owes money to another. It typically displays the amount owed and the names of the individuals involved. It usually doesn\u2019t include detailed repayment terms, interest, or legal wording. 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