Written Homework #3
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    Promissory Note

    Background:
    • Jack Johnson and his cousin are the two shareholders of Canary, Inc.  Jack owns a majority of the stock.  The corporation is having a temporarily cash shortfall.  Jack wants to make an unsecured loan to the corporation.  The loan will be evidenced by a Promissory Note ("Note") executed by Canary, Inc. (the borrower).

    Writing Assignment
    • Prepare the Note

    Terms Negotiated by the Parties
    • Borrower:  Canary, Inc

    • Hedy Lamar is the president of Canary, Inc.

    • Lender:  Jack Johnson

    • Principal amount: $5,000.00

    • Interest:  6% per annum

    • Repayment:  The entire unpaid principal and interest shall be payable on demand one (1) year from the date that the Promissory Note is executed.  Prepayment is allowed

    • The Promissory Note must meet the requirements of a "negotiable instrument" as defined in Chapter 673.1041 FS - Florida's version of UUC-3

    • The Promissory Note must state that the maker waives presentment and notice of dishonor (see Florida's version of the UCC for a an explaination of these terms - Sec 5041(2) FS)

    Comment:
    • This is a loan being made to a closely held family corporation by its majority shareholder.  The document should be simple and straight forward.  Do not include any covenants, provisions, or representations that are not specified in this writing assignment

    • A reason to keep it simple is that there is a 0% chance of litigation between the parties (the lender is the majority owner of the borrower).  The reason that the document is being executed is to prove that the injected funds were a loan and not an equity investment (which would be relevant in the unlikely event that the company ever filed for a bankruptcy).