Montana Promissory Note
Montana promissory note template with the state's rate cap (15% or prime plus 6%) and 6-year statute of limitations. Free template. Attorney review available.
Introduction
Montana's own commercial code lists a confession-of-judgment clause, a clause letting the payee obtain a court judgment without a lawsuit, as one of the few extra promises a note can carry without losing its status as a negotiable instrument. A separate statute then bans that exact clause outright: any written contract creating a promise to pay money that empowers someone to confess judgment on a party's behalf is illegal, void, and unenforceable in Montana's courts, a rule on the books since 1935, not a recent reform. A promissory note is still, at its core, a written, signed promise by one party, the maker, to pay a definite sum of money to another, the payee, either on demand or by a set date, and it's the paper trail that makes a family loan, a small business loan, or a loan between friends enforceable if the maker doesn't pay. Montana's interest-rate cap floats rather than sitting at a flat number: if the maker and payee fix a rate in writing, it can't exceed the greater of 15% per year or 6 percentage points above the prime rate the Federal Reserve publishes for bank loans, applied the same way no matter how large the loan is or what it's for. Absent a written rate, the default is 10% per year. Charging above the cap forfeits double the interest on the note. A Montana note doesn't need to be notarized or witnessed to be enforceable, and you generally have 6 years from a missed payment or the note's due date to sue to collect.
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
If the maker and payee fix a rate in writing, Montana caps it at the greater of 15% per year or 6 percentage points above the prime rate the Federal Reserve publishes for bank loans (measured 3 business days before signing). The same cap applies no matter the loan's size or purpose. Absent a written rate, the default legal rate is 10% per year. A "regulated lender" (a bank, credit union, licensed consumer lender, and similar) is exempt from the cap entirely. (Montana Code Annotated Section 31-1-107; Section 31-1-106; Section 31-1-112)
- 3
Charging more than the applicable cap forfeits double the interest the note carries or was agreed to pay, not just the excess above the cap. If the excess interest was already paid, the payer may recover double that amount, but only in a suit filed within 2 years of the payment and only after first making a written demand for its return. (Montana Code Annotated Section 31-1-108)
- 4
A Montana promissory note does not need to be notarized or witnessed to be enforceable. Montana Code Annotated Section 30-3-104 lists what makes a note a valid negotiable instrument (an unconditional promise, a fixed amount, a signature, payable on demand or by a definite date), and notarization isn't one of the requirements.
- 5
A confession-of-judgment clause is illegal and void in Montana for any written contract creating a promise to pay money, including a promissory note, a rule dating to 1935. This holds even though Montana's own UCC negotiable-instruments statute separately lists a power to confess judgment as a type of clause a note can include without losing its negotiability; the UCC listing doesn't make the clause enforceable. (Montana Code Annotated Section 28-2-709; Section 30-3-104)
- 6
You generally have 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note in Montana. (Montana Code Annotated Section 27-2-202)
- 7
If a Montana promissory note is secured by personal property, the lender generally needs to file a UCC-1 financing statement with the Montana Secretary of State to protect its priority against other creditors. Promissory notes are commonly used in Montana for family loans, small business loans, and LLC loans between members. (Montana Code Annotated Section 30-9A-310)
Key decisions before you file
Before you file a Promissory Note in Montana, 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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Montana Requirements for Promissory Note
If fixed in writing, the rate may not exceed the greater of 15% per annum or 6 percentage points above the prime rate published in the Federal Reserve System's H.15 release for bank prime loans, measured 3 business days before signing. The default rate absent a written rate is 10% per annum (Section 31-1-106). A regulated lender, such as a bank or credit union, is exempt from the cap entirely (Section 31-1-112).
Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.
Montana does not require a promissory note to be notarized or witnessed to be enforceable. Commercial Code Section 30-3-104's list of what makes a note a valid negotiable instrument does not include notarization or witnessing; notarization is optional and used only for evidentiary purposes.
Charging more than the applicable usury cap forfeits double the interest the note carries or was agreed to pay, not just the excess above the cap. If the excess interest was already paid, the payer may recover double that amount, but only in a suit filed within 2 years of the payment and only after first making a written demand for its return.
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.
Montana Consumer Loan Act licensing requirements apply only to a person engaged in the business of making consumer loans. A private lender who makes fewer than 4 consumer loans a year with their own funds and does not represent themselves as being in the lending business is not required to comply.
Any written contract creating a promise to pay money, including a promissory note, may not contain a provision empowering another person to confess judgment on a party's behalf; the provision is illegal, void, and unenforceable, a rule in place since 1935.
If a note is secured by personal property, the lender generally must file a UCC-1 financing statement with the Montana Secretary of State to perfect and prioritize its security interest against other creditors.
Frequently Asked Questions
If the maker and payee fix a rate in writing, Montana caps it at the greater of 15% per year or 6 percentage points above the prime rate the Federal Reserve publishes for bank loans, and the same cap applies regardless of the loan's size or purpose. Absent a written rate, the default legal rate is 10% per year. A regulated lender, such as a bank or credit union, is exempt from the cap entirely.
No. Montana Code Annotated Section 30-3-104 lists what makes a note a valid, enforceable negotiable instrument, and notarization isn't one of the requirements. Notarizing a note is optional and can help as evidence of who signed it, but it doesn't affect enforceability.
Include the principal amount, an interest rate within Montana's usury cap, the repayment schedule, what counts as default, and the signatures of the maker and payee. Don't include a confession-of-judgment clause: Montana law makes that specific clause illegal and void in any written contract to pay money, so the note relies on a regular lawsuit for enforcement if the maker defaults.
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 Montana Code Annotated Section 30-3-104: an unconditional promise to pay a fixed amount, a signature, and payment on demand or by a definite date. It doesn't need to be notarized to be enforceable.
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 with the Montana 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. Montana makes a confession-of-judgment clause illegal and void in a written promise to pay money, so the payee cannot get a judgment without filing a lawsuit, even though Montana's own UCC statute separately lists that clause type as one that doesn't strip a note of its negotiability.
Generally 6 years from a missed payment or the note's stated due date, under Montana's statute of limitations for actions on a written contract (Montana Code Annotated Section 27-2-202). Waiting too long can mean losing the right to sue on the note.
Yes. Promissory notes are commonly used in Montana for both family loans and business or LLC loans. A private lender who makes fewer than 4 consumer loans a year with their own money and doesn't hold themselves out as being in the lending business generally doesn't need a Montana Consumer Loan Act license, which covers the typical occasional family or LLC loan.