Note

1 What is a Note? One note is a musical tone; another note is a written communication; still another note is the verb to see or observe.

2 In this report we discuss the written communication meaning of the word note.

3 The origin of the written communication form of the word note is found in Latin.

4 Today we regularly use the words notice (observe, detect), notary (a witness); notion (mental picture), notation (written thought), and connote (indicate).

5 GENERAL & SPECIFIC MEANINGS

6 Actually, there are two written communication meanings of the word note, one general, the other specific.

7 An example of the general meaning of the word note would be a short note you write to a co-worker to let him know you will be out of the office for the remainder of the day.

8 For an example of a specific meaning of the word note we must delve into the subject of money and law.

9 If you were to go to a bank to seek a loan, a loan officer would ask you to complete a loan-application form.

10 If the loan were approved, you would be asked to sign a document which stated your agreement to pay back the loan of credit in some certain way.

11 The certain way might involve monthly payments of a certain amount for a certain number of months, and include a certain interest charge, with payments to be sent to a certain address, etc., etc.

12 This kind of document is sometimes called a Retail Credit Installment Note — or just a Note.

13 For the remainder of these reports, Note (with a capital “N”) refers to a pay-back agreement, at law.

14 For a pay-back agreement to be called a Note it must have four essential elements, or parts. If a written instrument does not have all four of these elements it is not a Note at law.

15 What, then are the four essential elements needed on a written instrument for the written instrument to be a Note at law?

15.1. The first element is the maker of the Note — the party who is to pay-back the loan. In the case of the Note to the bank, you the borrower would be the maker of the Note.

15.2. The second element is the receiver of the Note — the party who is to receive the pay-back payments. In the case of a Note to the bank, the bank is the party who is to receive the payments. He is therefore the payee.

15.3. The third element is the due-date of the Note — the date when each payment is payable and due — or the date that the Note is to be paid by a single payment (as in a “90-day-Note”), and closed.

15.4. The fourth element is the dollar-amount of the Note — the pay-back amount that will satisfy and close the loan. If you borrowed $100 from your neighbor, and if no interest were involved, you might give your neighbor an “IOU” (“I owe you”) stating that you would pay him the $100 dollar-amount on or before such-and-such a date.

16 Let’s list these essential elements again:

16.1. The Maker - you for example.

16.2. The Receiver - the bank or your friend.

16.3. The Due-date - when the loan is to be closed.

16.4. The Dollar-amount - $100 for example.

17 Now you have a better idea of what the law requires in a Note.

18 Remember, a Note is a special form of business contract.

19 NOTES ARE AGREEMENT CONTRACTS

20 A contract at law is a promise by one party to do something for a second party for some “good and valuable consideration.”

21 In your agreement with the bank, you (the maker) promise (agree) to give a consideration (pay interest) to the bank (the payee) for a service (the loan of money) for a designated period of time (which ends with the due-date).

22 The phrase “Promissory Note” is used to distinguish a payback Note from a routine memorandum note.

32 Since a due-date is needed for a Note to be a contract, we can correctly state that, all Notes are contracts, but all contracts are not Notes.

33 We introduce the subject of contracts because the law says something about them that is often overlooked, even by professionals.

34 In order for a writing to be a contract at law, that writing must express the clear intent of both parties to the contract.

35 In order for the intent of the contract to be clear, it must be stated clearly.

36 If you were to sit at a typewriter and type a few thousand “X’s” and “7’s” on a sheet of paper, you would not have made a contract, even if you and your neighbor had signed the paper, because the “X’s” and “7’s” do not express any intent.

37 If you wrote the following on a sheet of paper you would still not have made a contract:

38 “I, Joe Smith, Neighbor, Sam, $100 tomorrow.”

39 The example above would not be a contract at law, even if you and your neighbor signed it, because it does not make sense.

40 The letters, punctuation marks, and numbers may be clearly indicated on the paper, but the intent of the parties is not clearly expressed — only isolated words and sentence-fragments are used.

41 In written and spoken statements clarity of intent is expressed through the use of complete sentences.

42 If a writing does not bear at least one complete sentence — with a subject, predicate and verb, or verb-phrase — that writing cannot be a contract.

43 If it cannot be a contract, it cannot be a Note at law.

44 Even if a writing involves many complete sentences, it cannot be a Note unless those sentences contain the four essential elements required in Notes.

45 This is not to say that the example above might not be called a Note by someone.

46 We are saying that according to law it is not a Note. We are interested in what the law says, not what a co-worker or neighbor might say.

47 Even if you see a formal-looking written instrument that has the word NOTE on it, don’t jump to the conclusion that the instrument is a Note at law.

48 You could spray-paint the word Note on your basement wall but that would not mean that your basement wall had become a Note.

49 A neighbor could use an acetylene torch to cut the word Note in a fender of your car but that would not mean that your fender is a Note.

50 GENUINE NOTES

51 If you want to see an example of a genuine Note at law, ask your local banker to see the repayment agreement (Note) you would need to sign if you took out a loan.

52 If you want to see another example of a genuine Note at law, ask a coin dealer to show you a United States Gold Certificate or Silver Certificate, or a Federal Reserve Note from any of the following Series: 1914, 1928, 1934, and 1950.

53 You will see on each of the above-cited instruments at least one complete sentence containing all four of the essential elements of a Note.

54 The critical sentence on a genuine Federal Reserve Ten-Dollar Bill (1950 Series) that makes it a Note is:

55 THE UNITED STATES OF AMERICA WILL PAY TO THE BEARER ON DEMAND TEN DOLLARS

56 The subject is THE UNITED STATES OF AMERICA, the verb-phrase is WILL PAY, the predicate is TO THE BEARER ON DEMAND TEN DOLLARS .

57 The maker is THE UNITED STATES OF AMERICA, the receiver is THE BEARER, the dollar-amount is TEN DOLLARS, and the due-date is ON DEMAND.

58 If you wish to see a piece of paper that is called a Note, but is NOT a Note at law, examine the contents of your wallet or purse.

59 Today’s paper currency — those so-called “dollar-bills” — ones, fives, tens, and twenties, etc. — bear the word NOTE in two places, yet as a financial instrument in legal contemplation, that currency is no more a NOTE than is this report.

60 In reality there are no Federal Reserve Notes in circulation anywhere in the world today.

61 The so-called “dollar-bills” in circulation today in the United States and elsewhere in the world can be more appropriately called Federal Reserve Tokens.

62 Here are the key things you need to remember about Notes:

62.1. Four elements are required before a financial writing will be considered a Note, at law.

62.2. The intent of a Note must be expressed in one or more complete sentence(s), because a Note is a business contract.

62.3. A complete sentence is comprised of a subject, a predicate and a verb, or verb-phrase.

62.4. A financial writing void of a complete sentence and any one or more of the four elements of a Note is not a Note.

63 May the grace of our Lord Jesus Christ be with you all. Amen.