DEMAND PROMISSORY NOTE

Principal: $10,000 Date issued: March

Maturitydate: April 1, 2008

Soderton, New York

Forvalue received, the undersigned ("Maker") promises to pay on demand to the order of

Soderton National Bank ("Payee") at its offices at 99 Hartsdale Avenue, Soderton,

York,the principal sum of ten thousand dollars ($10,000), together with interest at the rate

and in the manner hereinafter provided for on the outstanding principal hereof from time

to time until paid in full.

Interestshallaccrue on the outstandingprincipalbalance of this note commencingon the

date hereof and continuing until repayment of this note in full at a rate per annum equal

to 6%. Interest-onlypayments shallbe made by Makerto Payee on or before the 1st day

of each month.

Maker shall make all payments hereunder to Payee in US dollars.

The maturity of this note may be accelerated by Payee in the event Maker is in breach or

default of any of the terms, conditions, or covenants of any other agreement with Payee or

its affiliates. In the event of default in payment of any interest payments when due

hereunder, the whole sum of principaland interest shall become immediately due

payable.

Interest rate: 6% per annum

4 Read the note and answer these questions.

1 When does the maker of this promissory note have to repay the principal?

2 When are interest-only payments due?

3 What happens in the event that the maker defaults on the payment of an

instalment?

5 Explain these phrases from the note in your own words.

1 for value received

2 the undersigned

3 on demand

4 to be in default of the terms of an agreement

6 Complete the sentences below using the words in the box.

accrue

principal

due instalment interest maturity outstanding

1 The cost paid by a borrower for the use of the money borrowed is known as

.....................

2 The. is the amount borrowed from the lender, excluding interest.

3 An amount of money which has not yet been repaid is said to be ........

4 A debt is when the date is reached when it must be repaid.

S When interest accumulates or increases, it is said to ..................

6 is the date on which a debt becomes due for payment.

7 One of a series of payments made at intervals over a period of time is

referred to as an .

9 1. bi e s on.

In somejurisdictions, private individuals are required to charge a lower interest rate than

financial institutions. The charging of an unlawfully high interest rate is known as usury.

In most jurisdictions, usury is a criminal offence.

7 What is the situation in your jurisdiction? What is the limit on interest rates for

private loans? What are the penalties for usury?

ning ng p n

Lawyers sometimes assist their clients in drawing up negotiable instruments or in dealing

with legal problems that arise in connection with their use. The following dialogue

between a lawyer, Ms Benton, and her client, Mr Carter, concerns a poorly drafted

promissory note.

S ..;:: Listen to the conversation and tick which of these formal requirements for

the negotiability of an instrument Ms Benton mentions.

1 The instrument must be in written form.

2 The instrument must be signed.

3 The instrument must state that it is 'payable to ...'.

4 The instrument must state a sum certain in money.

S The instrument must state under which conditions it does not apply.

6 The instrument must provide the name of a financial institution.

7 The instrument must contain an unconditional order or promise to pay.

S The instrument must state that it is payable on demand or at a

definite time.

9 Answer these questions.

1 What are the two requirements which the client's promissory note does not

meet?

2 What condition did the borrower make regarding repayment?

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Unit 12 Negotiable instruments

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s n92 ning i c e

Here are some of the phrases Ms Benton uses in the interview to rephrase

ideas so that the client can understand them:

There are certain formal requirements that have to be met [by a promissory

note] for it to be negotiable, that is, to be enforceable by you as a holder in

due course.

The note has to mention what is l'\Down as a 'sum certain '. ThCltis to say, ...

Allow me to explain. 'Unconditional' means that".

Other phrases that can be used after an Unfamjliar word or a difficult concept

to introduce an explanation are:

In other words...

Put simply, ...

What this actually means is ....

1.0Work with a partner, with one of you playing the role of a lawyer, Ms Chang, and

the other the role of a client, Mr West. Mr West shows his lawyer the

promissory note below and wants to know if it is valid.

Ms Chang should discuss whether the following promissory note meets all of

the six requirements for negotiability referred to in Exercise 8, explaining each

requirement in plain language to Mr West. Mr West should ask Ms Chang to

explain any special terms.

These phrases for talking about requirements may be useful:

I don't think it meets the requirement about...

There is also a requirement concerning...

It certainly fulfils that requirement.

It doesn't satisfy the requirement dealing with,..

PROMISSORY NOTE

March31, 2006 Collegeville, Pennsylvania

$30 00

FORVALUERECEIVED,and which must be receivedpursuantto agreementbetween the

partiesdated February17,2006, 3 monthsfromthe dateof thisNote,I promiseto payto

KeithWestthe sum of thirty thousand dollars (30,000) with interest in an amount to be

decided by the parties.

BY:Dfa:fh:k

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11Following their interview about the poorly drafted promissory note, the lawyer,

l~~0W Ms Chang, receives the following letter from her client Mr West.

)}P.299

Dear Ms Chang

Thank you for sharing your time and expertise with me last Thursday. I now

realise (somewhat too late, I'm afraid) that promissory notes have to be drafted

correctly to be legally binding. In order to avoid such regrettable situations arising

in the future, I would ask you to provide the six requirements for me once more -

this time in writing.

Many thanks in advapce,1 JookJQrwardto hearing fmm you.

Sincerely yours

Keith West

In order to fulfil her client's request, Ms Chang will need to summarise the six

requirements she explained to him in their interview. How do you think the

information should be organised in her response? What can Ms Chang do to

make the information easier for her client to understand?

Write a letter in response to Mr West's request, in which you provide the

information he has asked for. When stating the requirements for negotiability,

explain difficult legal expressions in easy to understand plain language. In your

letter, you should:

0 refer to the previous contact with Mr West;

0 provide the desired information in a clearly structured format;

0 explain ideas in simple terms;

0 offer further assistance and explain the importance of having a lawyer to

review the wording to ensure enforceability and negotiability.

n

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In9 e ni

The growth of the Internet and of e-commerce has led to far-reaching changes in the way

business is conducted. It should come as no surprise that negotiable instruments can now

be exchanged in electronic form. The text on page 170deals with USlegislation governing

electronic negotiable instruments and looks specifically at a newly created form of

electronic negotiable instrument.

12Skim the text quickly. What is this instrument called?

13Read the text, and match these headings (a-e) with the paragraphs (1-5).

a A new kind of instrument

b Provisions included in the act

c The purpose of the act

d Some possible effects

e Limits to applicability

Unit 12 Negotiable instruments

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Date: 2015-12-11; view: 1558