Delaware Promissory Note
Delaware promissory note template with the state's floating usury cap and 6-year statute of limitations for notes. Free template. Attorney review available.
Introduction
Delaware does not set a flat usury ceiling the way many states do. For a loan of $100,000 or less, the cap floats at 5% per year over the Federal Reserve discount rate rather than a fixed number, and once a loan passes $100,000 and isn't secured by the borrower's home, Delaware places no limit on the interest rate at all. A promissory note is the paper record behind that debt: a written, signed promise by one party, the maker, to pay a definite sum of money to another party, the payee, on demand or by a set date, and it's what makes a family loan, business loan, or loan between friends enforceable if the maker stops paying. Delaware also still allows a confession-of-judgment clause, sometimes called a cognovit clause, letting the payee obtain a court judgment through the county prothonotary without a full lawsuit if the maker defaults; several other states, including California, have banned this clause outright, but Delaware permits it, with statutory notice, unwaived-defense, and automatic-stay protections for the maker. Nowhere on Delaware's statutory checklist for a valid note does a notary stamp appear, so skipping one costs nothing in enforceability. A lawsuit to collect on a Delaware note specifically has 6 years to be filed, double the state's ordinary 3-year limit for a general written promise.
Key Things to Know
- 1
A promissory note is a written, signed promise by one party (the maker) to pay a definite sum of money to another party (the payee), either on demand or by a set date.
- 2
For a loan of $100,000 or less, Delaware caps interest at 5% per year over the Federal Reserve discount rate (the floating benchmark rate the Fed charges banks), rather than at a fixed percentage. For a loan over $100,000 that isn't secured by the borrower's principal residence, Delaware places no limit on the interest rate at all. (6 Del. C. Section 2301)
- 3
Delaware's test for a valid note, set out in 6 Del. C. Section 3-104, is an unconditional promise to pay a fixed amount, a maker's signature, and payment on demand or by a definite date. A notary stamp or witness signature is not on that list, so leaving one off does not make the note unenforceable.
- 4
Delaware permits a confession-of-judgment clause (a warrant of attorney letting the payee ask the court to enter judgment against the maker without a full lawsuit) in a promissory note. The clause is entered through the prothonotary and comes with built-in protections: notice to the maker, a preserved right to raise defenses that were unknown at signing or arose later, and an automatic stay of execution until the maker has a chance to be heard. (10 Del. C. Sections 2306 and 3908)
- 5
A lawsuit to collect on a written promissory note in Delaware generally must be filed within 6 years of a missed payment or the note's due date. That's a longer window than Delaware's ordinary 3-year limit for a general written promise; the 6-year period applies specifically to promissory notes and bills of exchange. (10 Del. C. Section 8109)
- 6
If a Delaware promissory note is secured by personal property rather than real property, the lender generally needs to file a UCC-1 financing statement, typically with the Delaware Secretary of State, to protect its priority against other creditors. (6 Del. C. Section 9-310)
- 7
Promissory notes are commonly used in Delaware for family loans, business loans, and loans between friends. A person who makes no more than 5 loans in any 12-month period isn't considered to be "in the business" of lending, so an occasional private note like this generally falls outside Delaware's Licensed Lenders licensing rules. (5 Del. C. Sections 2201-2202)
Key decisions before you file
Before you file a Promissory Note in Delaware, a few decisions shape the document: which option to choose and what each one means. The Promissory Note guide walks through them.
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Delaware Requirements for Promissory Note
For a loan of $100,000 or less, the maximum is 5% per year over the Federal Reserve discount rate. Where there is no expressed contract rate, the same 5%-over-discount-rate figure applies as the default legal rate.
A borrower charged more than the lawful rate is not required to pay the excess and may deduct it from any debt owed. A borrower who already paid excess interest may recover 3 times the excess interest collected, or $500, whichever is greater, if suit is brought within 1 year.
To be a valid negotiable instrument, a note must be an unconditional promise to pay a fixed amount, signed by the maker, and payable on demand or at a definite time.
An action on a promissory note generally must be brought within 6 years of accrual (a missed payment or the note's due date). That is longer than Delaware's ordinary 3-year period for a general written promise (10 Del. C. Section 8106(a)).
Delaware places no limit on the interest rate charged for a loan exceeding $100,000 where repayment is not secured by a mortgage against the borrower's principal residence.
If a note is secured by personal property, the lender generally must file a UCC-1 financing statement, typically with the Delaware Secretary of State, to perfect and prioritize its security interest against other creditors.
The statutory checklist for a valid Delaware note (unconditional promise, fixed amount, signature, payment on demand or by a definite date) does not include a notary stamp or witness signature; adding one is optional and useful only as evidence of who signed.
Delaware allows a confession-of-judgment clause in a note, entered through the prothonotary, subject to statutory notice, unwaived-defense, and automatic-stay protections for the maker. Including the clause is optional, not required.
Frequently Asked Questions
For a loan of $100,000 or less, Delaware caps interest at 5% per year over the Federal Reserve discount rate, a floating benchmark rather than a fixed percentage. For a loan over $100,000 that isn't secured by the borrower's principal residence, Delaware places no statutory limit on the interest rate at all.
No, and Delaware doesn't require a witness either. 6 Del. C. Section 3-104 spells out the full checklist for a valid note (an unconditional promise, a fixed amount, a signature, payment on demand or by a definite date), and a notary acknowledgment isn't part of it. Adding one is still worthwhile as evidence of who signed, just not a condition of enforceability.
Include the principal amount, the interest rate (within Delaware's floating usury cap or the over-$100,000 exception), the repayment schedule, what counts as default, and the signatures of the maker and payee. Because Delaware still permits confession-of-judgment clauses, decide deliberately whether to include one; it's optional, not required, and it waives procedural rights the maker would otherwise have.
Yes, as long as it meets the basic requirements of a valid contract and, if it's meant to be a negotiable instrument, the elements in 6 Del. C. Section 3-104: an unconditional promise to pay a fixed amount, a signature, and payment on demand or by a definite date. A notary is not on that list, and its absence has no bearing on whether the note holds up.
An unsecured note relies only on the maker's promise to pay. A secured note is backed by collateral, and if it's secured by personal property rather than real estate, the lender generally needs to file a UCC-1 financing statement, typically with the Delaware Secretary of State, to protect its priority against other creditors.
The payee can declare the remaining balance immediately due (if the note includes an acceleration clause) and can sue to collect. If the note includes a confession-of-judgment clause, which Delaware permits, the payee can also seek judgment through the prothonotary without a full lawsuit, though the maker keeps statutory rights to notice, to raise later-discovered defenses, and to an automatic stay pending a hearing.
Generally 6 years from a missed payment or the note's stated due date, under Delaware's statute of limitations for promissory notes specifically (10 Del. C. Section 8109), which is longer than the state's ordinary 3-year period for a general written promise. Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used for both family loans and business or LLC loans in Delaware. A person who makes no more than 5 loans in any 12-month period isn't considered to be "in the business" of lending under Delaware's Licensed Lenders law, so a typical family or one-off business note generally falls outside those licensing rules, though the same usury and enforceability rules still apply.