How to maintain a legally valid promissory note

On Behalf of | Feb 1, 2023 | Contract Disputes |

You may have a promissory note forming an agreement with another party. This document binds the signer to pay you a specific amount of money in exchange for a loan or another service. If the debtor is late with your payment, you could use the note to claim the debt.

However, collecting your money may become a problem if there are issues with your note. Chron explains how to help ensure that your agreement remains valid if you take legal action to acquire your money.

Have the original copy on hand

A court may not support your claim if you cannot prove the existence of the note. Sometimes people can collect on a debt if they prove they had a promissory note but lost it or it suffered destruction. Still, you could help your case if you can hold on to the original copy of the note.

Change the note by agreement

It is possible to change the terms of a promissory note, but both you and your debtor must agree to the alterations. If your debtor does not approve of your desired changes, you could alter the note yourself but a court is unlikely to uphold your revised note.

Avoid errors in the note

Mistakes made in writing a promissory note could invalidate it. Sometimes a debtor fails to add a signature to a note. The terms of the note may be illegal as well. Your agreement should follow all relevant laws for it to be valid.

Keep in mind that promissory notes differ in complexity. Someone taking out a credit line from you may only sign a simple note. It could be different, however, if someone is paying you under a mortgage loan. Extra scrutiny is likely necessary for a complex note.

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