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 Specific Types of Contracts and Contract Issues Promissory Notes are agreements tendering a loan by one party to another, stating the terms by which repayment of this amount will be made, usually with interest. Once signed, a promissory note's terms must be fully complied with. Often the promissory note will have one or two important additional terms: (1) prepayment penalty provision; and/or (2) acceleration clause. A prepayment penalty would mean you may be charged a penalty for early payments. You should avoid signing a note with such a provision if possible, so that you can simply pay off the note early, if your circumstances change. This means you might be able to save the remaining interest charges. An acceleration clause means that should you fail to make a payment during the specified time, the note holder can declare a breach and require full payment of the entire obligation. Legally, this harsh result could stand up in court. Thus, before signing a promissory note, you should consult an attorney, who might be able to negotiate a promissory note that does not contain either of these provisions, or other terms which may harm you. We have included as samples, three types of promissory notes for your review. See (Legal Document Library):
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