Contingent Installment Promissory Note

Summary

This template is a contingent installment promissory note, where payments due are contingent upon the occurrence of a specific event(s). This note automatically terminates on a set date, even if the contingency is never met during the term of the note and, thus, no payments of principal were ever made to the payee. This template includes practical guidance and drafting notes. A promissory note in general memorializes one party's obligation to pay a certain sum of money to another party according to specific terms. It is frequently entered into pursuant to an agreement (such as a loan or sales agreement) between the named parties and as such, is often attached thereto as an exhibit. Unless otherwise stated to the contrary in the note, a promissory note may be transferred by the payee to another holder by endorsement (generally in the form of an allonge). A contingent promissory note should, at a minimum, include the following information: (1) the payor's identity, (2) the payee's identity, (3) the principal amount to be paid by the payor, (4) the requisite interest payment, (5) the payment contingency, (6) payment due dates and the note's termination date, as applicable, (7) the payee's rights upon payor's default, and (8) the note's governing law. Additionally, depending on the jurisdiction in which the loan is made, the customs and practices of the parties, and certain additional factors, a promissory note may include other material terms, such as whether the loan may be prepaid ahead of schedule (and if so, with or without penalty), a list of loan defaults, and other boilerplate clauses, such as choice of law, severability, notices, and waiver provisions. A promissory note should comply with the requirements of Article 3 of the Uniform Commercial Code as interpreted and applied by the applicable jurisdiction governing the transaction. For additional guidance, see Promissory Notes and Promissory Notes Resource Kit (Small to Mid-Sized Law).