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Provide a template for a Promissory Note.
Promissory Note Template
A promissory note is a legal document that outlines the terms of a loan agreement between a lender and a borrower. It serves as a written promise by the borrower to repay the lender a specified amount of money, either on demand or at a future date. Below is a detailed template for a promissory note that is relevant to Kenya and Kenyan law.
Table of Contents
Introduction
Promissory Note Template
Key Elements of a Promissory Note
Legal Considerations
Conclusion
TLDR
1. Introduction
A promissory note is a crucial document in financial transactions, especially in lending and borrowing scenarios. It provides a clear record of the loan terms and the obligations of the borrower. In Kenya, promissory notes are governed by the Bills of Exchange Act (Cap. 27) and other relevant laws. This template will help you draft a comprehensive promissory note that adheres to Kenyan legal standards.
2. Promissory Note Template
PROMISSORY NOTE
Date: [Date]
Principal Amount: KES [Amount]
**FOR VALUE RECEIVED, the undersigned, [Borrower's Full Name], residing at [Borrower's Address], ("Borrower"), promises to pay to the order of [Lender's Full Name], residing at [Lender's Address], ("Lender"), the principal sum of KES [Amount] (Kenyan Shillings [Amount in Words]), with interest at the rate of [Interest Rate]% per annum on the unpaid balance.
1. Payment Terms:
1.1 The principal and interest shall be payable in [Number] installments of KES [Installment Amount] each, commencing on [Start Date] and continuing on the [Day] of each month thereafter until the principal and interest are fully paid.
1.2 Payments shall be made to the Lender at [Lender's Payment Address] or at such other place as the Lender may designate in writing.
2. Prepayment:
2.1 The Borrower may prepay this Note in whole or in part at any time without penalty. Any prepayment shall be applied first to accrued interest and then to the principal balance.
3. Default:
3.1 If the Borrower fails to make any payment when due, the entire unpaid principal and accrued interest shall become immediately due and payable at the option of the Lender.
3.2 In the event of default, the Borrower agrees to pay all costs of collection, including reasonable attorney's fees, incurred by the Lender.
4. Waiver:
4.1 The Borrower and all endorsers, guarantors, and sureties of this Note hereby waive presentment, demand, notice of dishonor, protest, and all other demands and notices in connection with the delivery, acceptance, performance, default, or enforcement of this Note.
5. Governing Law:
5.1 This Note shall be governed by and construed in accordance with the laws of the Republic of Kenya.
6. Miscellaneous:
6.1 This Note constitutes the entire agreement between the parties and may not be amended except in writing signed by both parties.
6.2 If any provision of this Note is found to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.
IN WITNESS WHEREOF, the Borrower has executed this Promissory Note as of the day and year first above written.
Borrower:
[Borrower's Full Name]
[Borrower's Signature]
[Date]
Lender:
[Lender's Full Name]
[Lender's Signature]
[Date]
Witness 1:
[Witness 1 Full Name]
[Witness 1 Signature]
[Date]
Witness 2:
[Witness 2 Full Name]
[Witness 2 Signature]
[Date]
3. Key Elements of a Promissory Note
A promissory note must include several key elements to be legally binding and enforceable:
Date: The date on which the promissory note is created.
Principal Amount: The total amount of money being borrowed.
Borrower and Lender Information: Full names and addresses of both parties.
Payment Terms: Detailed schedule of payments, including the amount, frequency, and start date.
Interest Rate: The annual interest rate applicable to the loan.
Prepayment Clause: Terms under which the borrower can repay the loan early without penalty.
Default Clause: Conditions under which the loan will be considered in default and the consequences thereof.
Waiver Clause: Waiver of certain legal rights by the borrower and any endorsers.
Governing Law: The jurisdiction under which the promissory note is governed.
Signatures: Signatures of the borrower, lender, and witnesses to validate the document.
4. Legal Considerations
In Kenya, promissory notes are governed by the Bills of Exchange Act (Cap. 27). It is essential to ensure that the promissory note complies with the following legal requirements:
Written Document: The promissory note must be in writing.
Unconditional Promise: The note must contain an unconditional promise to pay a specific amount of money.
Signature: The note must be signed by the borrower.
Payee: The note must specify the person to whom the payment is to be made.
Relevant Case Laws
National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR
Relevance: This case highlights the enforceability of promissory notes and the obligations of the parties involved.
Outcome: The court upheld the validity of the promissory note and enforced the payment terms.
Kenya Commercial Bank Ltd v James Osebe [1988] eKLR
Relevance: This case discusses the implications of default on a promissory note and the lender's right to recover the debt.
Outcome: The court ruled in favor of the lender, allowing for the recovery of the outstanding amount.
Githinji v Githinji [1982] eKLR
Relevance: This case addresses the issue of interest rates on promissory notes and the enforceability of agreed-upon interest.
Outcome: The court enforced the interest rate stipulated in the promissory note.
5. Conclusion
A well-drafted promissory note is essential for ensuring that both the lender and borrower are clear about the terms of the loan and their respective obligations. By including all the necessary elements and adhering to legal requirements, you can create a binding and enforceable promissory note. It is advisable to consult with a legal professional to ensure that your promissory note complies with Kenyan law and adequately protects your interests.
6. TLDR
A promissory note is a legal document that outlines the terms of a loan agreement between a lender and a borrower. It must include key elements such as the date, principal amount, payment terms, interest rate, and signatures. In Kenya, promissory notes are governed by the Bills of Exchange Act (Cap. 27). Relevant case laws include National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another, Kenya Commercial Bank Ltd v James Osebe, and Githinji v Githinji.
Sources:
This template and the accompanying information should help you create a comprehensive and legally sound promissory note.
Answered by mwakili.com