Texas Simple Promissory Note Preparation Packet
TEXAS SIMPLE PROMISSORY NOTE PREPARATION PACKET
NOT A NOTE OR LOAN AGREEMENT
Use this packet to decide whether counsel should draft a negotiable note, a nonnegotiable payment contract, or a note plus separate loan and collateral documents. Do not sign this packet or use it as evidence of debt.
1. TRANSACTION CONTROL
| Item | Verified entry |
|---|---|
| Proposed borrower / capacity | [________________________________] |
| Proposed lender / capacity and license status | [________________________________] |
| Principal and funding date | [________________________________] |
| Consumer / business / commercial / agricultural / other purpose | [________________________________] |
| Borrower, lender, payment, collateral, and performance locations | [________________________________] |
| Existing loan, refinance, renewal, modification, or new advance | [________________________________] |
| Related agreement, guaranty, or collateral document | [________________________________] |
| Drafting counsel and approval date | [________________________________] |
2. INSTRUMENT-STATUS DECISION
Select one only after counsel review:
- ☐ Draft a negotiable instrument under Tex. Bus. & Com. Code Chapter 3.
- ☐ Draft a conspicuously nonnegotiable note or payment agreement.
- ☐ Instrument status remains unresolved; no operative draft may issue.
For intended negotiability, record how the final note satisfies § 3.104:
| Requirement | Final-note treatment |
|---|---|
| Unconditional promise | [________________________________] |
| Fixed amount of money, with described interest or charges | [________________________________] |
| Payable to bearer or order when issued / first held | [________________________________] |
| Payable on demand or at a definite time | [________________________________] |
| No extra undertaking beyond permitted categories | [________________________________] |
Do not label an instrument “UCC compliant” or “negotiable” merely because it is titled promissory note.
3. PAYMENT-PROMISE DESIGN
| Term | Drafting instruction |
|---|---|
| Principal actually advanced | [________________________________] |
| Payee / order language | [________________________________] |
| Demand or definite payment date(s) | [________________________________] |
| Installment amount and dates | [________________________________] |
| Maturity / balloon amount and date | [________________________________] |
| Place and method of payment | [________________________________] |
| Application of payment | [________________________________] |
| Voluntary prepayment | [________________________________] |
| Acceleration right and trigger | [________________________________] |
| Extension right and definite limit | [________________________________] |
Under § 3.108, a fixed date or dates and specified prepayment, acceleration, or extension rights may fit a definite-time instrument. Counsel must ensure the completed terms remain readily ascertainable.
4. INTEREST, FEES, AND CHARGES REGISTER
| Amount or charge | Formula / amount | Legal classification | Current ceiling or authority | Calculation tested |
|---|---|---|---|---|
| Contract interest | [________] | [________] | [________] | [________] |
| Variable-rate index and adjustment | [________] | [________] | [________] | [________] |
| Default interest | [________] | [________] | [________] | [________] |
| Origination / commitment / administration | [________] | [________] | [________] | [________] |
| Late / delinquency charge | [________] | [________] | [________] | [________] |
| Prepayment amount | [________] | [________] | [________] | [________] |
| Collection, attorney, or other charge | [________] | [________] | [________] | [________] |
Section 3.112 permits described fixed or variable interest in an instrument, but it does not itself select the lawful rate or classify every charge. Counsel must determine the governing Texas Finance Code chapter, any federal or other-state overlay, lender status, transaction purpose, applicable ceiling, computation method, and treatment of every amount.
5. NO AUTOMATIC USURY CURE
Do not use “deemed a mistake,” “automatically reduced,” or automatic principal-credit language as a substitute for the governing law. Tex. Fin. Code § 305.103(a) states conditions involving actual discovery, correction within 60 days, necessary action and adjustment, and written notice before the obligor gives notice or files suit.
| Correction-control item | Evidence |
|---|---|
| Issue actually discovered | [________________________________] |
| Discovery date and decision record | [________________________________] |
| Current statute and transaction coverage verified | [________________________________] |
| Necessary adjustment / refund / interest calculated | [________________________________] |
| Written notice timing and delivery approved | [________________________________] |
| Obligor notice or action status checked | [________________________________] |
This worksheet does not determine that § 305.103 protection is available.
6. SEPARATE-DOCUMENT GATE
To preserve the intended instrument structure, place broader terms in separately reviewed documents when appropriate:
| Topic | Note / separate agreement / excluded | Document and cross-reference |
|---|---|---|
| Collateral grant and perfection | [________________________________] | [________________________________] |
| Guaranty | [________________________________] | [________________________________] |
| Financial reporting and inspections | [________________________________] | [________________________________] |
| Entity-maintenance and negative covenants | [________________________________] | [________________________________] |
| Representations and warranties | [________________________________] | [________________________________] |
| Cross-default and cross-collateralization | [________________________________] | [________________________________] |
| Indemnity, insurance, and liability allocation | [________________________________] | [________________________________] |
| Arbitration, forum, and jury treatment | [________________________________] | [________________________________] |
| Electronic records and signatures | [________________________________] | [________________________________] |
Section 3.106 allows specified references concerning collateral, prepayment, or acceleration, but a promise can become conditional if it says payment is subject to or governed by another record or that payment rights or obligations are stated there. Counsel must draft every cross-reference against the selected instrument-status goal.
7. DEFAULT AND ENFORCEMENT INSTRUCTIONS
| Issue | Counsel-approved instruction |
|---|---|
| Payment default | [________________________________] |
| Notice and cure | [________________________________] |
| Acceleration | [________________________________] |
| Waiver or presentment terms | [________________________________] |
| Collection costs and attorney fees | [________________________________] |
| Setoff | [________________________________] |
| Collateral remedies | [________________________________] |
| Bankruptcy, insolvency, and automatic-stay handling | [________________________________] |
| Limitations, demand, and enforcement forum | [________________________________] |
Do not promise remedies “without notice or demand,” automatic judgment, setoff, injunction, fees, or collateral rights without verifying the contract, governing law, procedure, and facts. A note does not perfect a security interest merely because it refers to collateral.
8. GOVERNING LAW AND DISPUTE CONTROL
| Determination | Counsel conclusion and current source |
|---|---|
| Governing law and conflicts | [________________________________] |
| Subject-matter and personal jurisdiction | [________________________________] |
| Venue | [________________________________] |
| Arbitration or court route | [________________________________] |
| Jury treatment | [________________________________] |
| Notice method and receipt | [________________________________] |
| Assignment and transfer restrictions | [________________________________] |
Do not write “state and federal courts in [county]” unless each selected court exists and has jurisdiction and venue. A contract clause cannot create federal subject-matter jurisdiction.
9. OPERATIVE DRAFT ASSEMBLY
Prepare separately, as applicable:
- ☐ final note with no unresolved blank or conflicting payment term;
- ☐ loan agreement for broader covenants and representations;
- ☐ security agreement, title document, mortgage or deed of trust, and filing instructions;
- ☐ guaranty and authority documents;
- ☐ required consumer, commercial, licensing, rate, or other disclosures;
- ☐ payment, amortization, fee, and payoff schedules; and
- ☐ funding and closing certificate.
10. FINAL COUNSEL REVIEW
- ☐ Transaction purpose, lender status, borrower status, and governing ceiling are verified.
- ☐ Every interest component, fee, charge, and calculation was classified and tested.
- ☐ Instrument status is selected and the final text satisfies that choice.
- ☐ Definite payment terms and any prepayment, acceleration, or extension rights are coherent.
- ☐ Broader loan, collateral, guaranty, and dispute terms are placed in appropriate documents.
- ☐ No automatic usury-cure fiction remains.
- ☐ No self-perfecting collateral, automatic remedy, federal-forum, or electronic-original conclusion remains.
- ☐ All operative documents were approved before signature and funding.
NON-OPERATIVE PACKET: It contains no promise to pay and must not be signed or funded against.
About This Template
Financial and banking documents govern loans, security interests, account agreements, and commercial transactions between lenders, borrowers, and financial institutions. Promissory notes, guaranties, security agreements, and UCC filings have precise legal requirements, and mistakes can leave a lender unsecured or a borrower on the hook for more than they agreed to. Well-drafted finance paperwork protects both sides and keeps the deal enforceable if something goes wrong later.
Important Notice
This template is provided for informational purposes. It is not legal advice. We recommend having an attorney review any legal document before signing, especially for high-value or complex matters.
Checked against the law it cites
A reviewer verified this template's legal citations against the official source on 2026-08-27.
Legal authority: Tex. Bus. & Com. Code § 3.104 (negotiable-instrument requirements and permitted undertakings); Tex. Bus. & Com. Code § 3.106 (unconditional promise and references to other records); Tex. Bus. & Com. Code § 3.108 (demand and definite-time payment); Tex. Bus. & Com. Code § 3.112 (interest description); Tex. Fin. Code § 305.103 (statutory correction conditions; no automatic usury cure)
Tex. Bus. & Com. Code § 3.104(a) (checked 2026-08-27): "Except as provided in Subsections (c) and (d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it: (1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder; (2) is payable on demand or at a definite time; and (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain: (A) an undertaking or power to give, maintain, or protect collateral to secure payment; (B) an authorization or power to the holder to confess judgment or realize on or dispose of collateral; or (C) a waiver of the benefit of any law intended for the advantage or protection of an obligor."
Tex. Bus. & Com. Code § 3.106(a)-(b) (checked 2026-08-27): "Except as provided in this section, for the purposes of Section 3.104(a), a promise or order is unconditional unless it states (i) an express condition to payment, (ii) that the promise or order is subject to or governed by another record, or (iii) that rights or obligations with respect to the promise or order are stated in another record. A reference to another record does not of itself make the promise or order conditional. A promise or order is not made conditional (i) by a reference to another record for a statement of rights with respect to collateral, prepayment, or acceleration, or (ii) because payment is limited to resort to a particular fund or source."
Tex. Bus. & Com. Code § 3.108(b) (checked 2026-08-27): "A promise or order is "payable at a definite time" if it is payable on elapse of a definite period of time after sight or acceptance or at a fixed date or dates or at a time or times readily ascertainable at the time the promise or order is issued, subject to rights of: (1) prepayment; (2) acceleration; (3) extension at the option of the holder; or (4) extension to a further definite time at the option of the maker or acceptor or automatically on or after a specified act or event."
Tex. Bus. & Com. Code § 3.112(a)-(b) (checked 2026-08-27): "Unless otherwise provided in the instrument: (1) an instrument is not payable with interest; and (2) interest on an interest-bearing instrument is payable from the date of the instrument. Interest may be stated in an instrument as a fixed or variable amount of money or it may be expressed as a fixed or variable rate or rates."
Last updated: 2026-08-27
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