Legal Definitions - executed note

An executed note refers to a promissory note that has been formally signed by the person or entity promising to pay (the "maker") and, if required, by the person or entity to whom the payment is due (the "payee"). The term "executed" in a legal context means that all necessary steps, primarily signing, have been completed to make the document legally valid and enforceable. Therefore, an executed note is a legally binding written promise to pay a specific sum of money, either on demand or at a specified future date.

Here are some examples illustrating an executed note:

• Example 1: Personal Loan Agreement

  Imagine Sarah lends $5,000 to her friend, Tom, to help him buy a used car. To formalize the agreement, they draft a document stating that Tom promises to repay Sarah the $5,000 plus a small amount of interest within one year, with monthly installments. Both Sarah and Tom sign this document, and they each keep a copy.

  This document becomes an executed note once Tom signs it, as his signature signifies his formal promise and legal obligation to repay the money according to the agreed terms. Sarah's signature might also be included to acknowledge receipt of the promise, but Tom's signature as the maker is crucial for its execution.

• Example 2: Business Credit Arrangement

  A small manufacturing company, "Innovate Tech," needs to purchase a large quantity of raw materials from a supplier, "Global Components," but requires 90 days to pay. Global Components agrees to extend credit but asks Innovate Tech to sign a promissory note for the total amount due, specifying the payment date and any late fees. The CEO of Innovate Tech signs this note on behalf of the company.

  By the CEO's signature, the promissory note becomes an executed note. This legally binds Innovate Tech to pay Global Components the specified amount by the due date, providing Global Components with a clear, enforceable claim if payment is not made.

• Example 3: Real Estate Transaction (Seller Financing)

  Mr. and Mrs. Chen are selling a piece of land to a young couple, the Millers. To help the Millers afford the purchase, the Chens agree to "seller finance" a portion of the sale price. This means the Millers will pay a down payment, and the Chens will act as the bank for the remaining balance. The Millers sign a promissory note, outlining the principal amount, interest rate, and monthly payment schedule to the Chens.

  The promissory note signed by the Millers is an executed note. Their signatures make their promise to repay the Chens legally enforceable, establishing a clear debt obligation that the Chens can rely upon.