note
A note is a written promise to pay money. In commercial law, a note usually refers to a promissory note, a document in which the maker promises to pay a fixed amount of money to the payee, holder, or other person entitled to enforce the instrument. Notes are commonly used in personal loans, commercial loans, mortgages, and business financing.
Under the Uniform Commercial Code (U.C.C.) Article 3, a note may be a type of negotiable instrument if it satisfies UCC § 3-104. In general, that section requires an unconditional promise to pay a fixed amount of money, with or without interest or other charges; to be payable to bearer or to order when issued or first possessed by a holder; to be payable on demand or at an explicit time; and not to require the maker to do anything other than pay money, except for limited permitted undertakings such as protecting collateral. The same section distinguishes a note from a draft: an instrument is a note if it is a promise and a draft if it is an order.
A note commonly states the principal amount, interest rate, maturity date, payment schedule, prepayment rights, events of default, and applicable remedies. Under U.C.C. § 3-412, the issuer of a note is generally obligated to pay the instrument according to its terms to a person entitled to enforce it.
A note may be unsecured or secured by collateral. For example, a mortgage note states a borrower's promise to repay a home loan, while the mortgage creates a security interest in the real property that secures payment. In a business loan, a note may be accompanied by a security agreement, pledge agreement, guaranty, or other contractual agreement.
The word "note" can also involve securities. The Securities Act of 1933 and the Securities Exchange Act of 1934 include "note" in the statutory definition of "security." Not every note is treated as a security, however. In Reves v. Ernst & Young, 494 U.S. 56 (1990), the Supreme Court applied the family-resemblance test, explaining that there is a rebuttable presumption that every note is a security unless it strongly resembles a category of notes that are not securities or should be treated as a non-security after considering additional factors such as; the parties' motivations, the plan of distribution, the public's reasonable expectations, and any applicable risk-reducing factors.
[Last reviewed in June of 2026 by the Wex Definitions Team]
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