- A promissory note is a legally enforceable instrument whereby a borrower promises to repay the full value of a loan to the bearer on demand or on a specified future date. Because the bearer of a promissory note pays the borrower personally, rather than through a third party financial institution, the bearer must accept the full burden of proof when taking legal action.
- A promissory note must be signed by the borrower, but not necessarily the bearer, to be legally enforceable. The instrument must contain a hand signature and signing date; it must also define the terms and conditions of the contract such as repayment. A promissory note does not contain a filing number -- meaning it is of public record at the office of the county clerk or county recorder-- but it should contain the seal of a notary public to show the identity of the borrower has been verified.
- In Arizona, a lender, known as the bearer of a promissory note, can bring legal proceedings against the borrower within five years of the date of the last payment received, at which point the promissory note moves to a default status and the contract becomes legally enforceable in a civil court. The court will award a judgment order for the bearer if the borrower cannot prove the contract was satisfactorily repaid.
- Compared to other state contract laws, Arizona's statute of limitations on promissory notes is quite low, but certainly not the lowest. The lowest statutes of limitations on promissory notes range from three to six years. Only 10 states have statutes higher than this range, and those states mandate statutes of limitations on promissory notes ranging from eight to 15 years.
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