A matter came across my desk recently. It was a “promissory note” downloaded off of the internet.
I put the term “promissory note” in quotes because while it was labeled a note, it wasn’t.
A promissory note – in order to be a note and become negotiable – has to include the magic words “pay to the order of” or “pay to order of Bearer.”
That sounds silly, but it is essential. Without the magic words, the payee can’t sell or assign the note.
Another requirement is that the note has to have a payoff date. This “note” didn’t have that either.
The worst aspect of this “note” was that there was no acceleration clause. What this means is if the maker misses a payment, then the payee can accelerate the date and declare the entire amount due. Without those magic words, the payee has to sue to collect on a regular basis. The statute of limitations runs after the first default. This is a huge problem. It is such a problem that I could only find one case with a note that did NOT include an acceleration clause. Again, this is a small thing and a layperson certainly doesn’t know how important this is.
I knew this “note” was hinky because it included the following archaic and meaningless language, “with interest calculated on … in accordance with NE ST Section 45-101.03 (Interest and Usury) of the Nebraska Statues.” That’s not the way to cite Neb. Rev. Stat., but moreover that language is meaningless.