Utah Promissory Note

Introduction

Key Things to Know

1. 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. 2

   Utah sets no statutory usury ceiling on the interest rate the maker and payee agree to in a lawful written, verbal, or implied contract; they may agree upon any rate. If the contract does not state a rate, the default legal rate is 10% per annum. (Utah Code Section 15-1-1)

3. 3

   Separately, Utah Code Section 76-6-520 makes it a third degree felony to knowingly engage in, or finance, "the business of making loans" at a rate higher than authorized by law. That criminal usury statute targets an unlicensed lending business operating above a rate ceiling set by a different, more specific licensing statute, not an isolated private note carrying a rate the parties lawfully agreed to under Section 15-1-1.

4. 4

   A Utah promissory note does not need to be notarized or witnessed to be enforceable. Utah Code Section 70A-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. 5

   Confession-of-judgment clauses are in a mixed position in Utah. Utah Code Section 78B-5-205 generally authorizes a judgment by confession without a lawsuit, but Utah Code Section 70C-2-201 bans a cognovit or confession-of-judgment clause specifically for a "creditor" who regularly extends consumer credit for personal, family, or household purposes ("regularly" means more than 25 extensions of credit in the preceding calendar year, or more than 5 for a dwelling-secured transaction). Because that line depends on the specific lender's pattern of lending, don't rely on a confession-of-judgment clause in a general-purpose note.

6. 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 Utah. (Utah Code Section 78B-2-309)

7. 7

   If a Utah promissory note is secured by personal property rather than real property, the lender generally needs to file a financing statement (UCC-1) to protect its priority against other creditors. (Utah Code Section 70A-9a-310)

Utah Requirements for Promissory Note

• Maximum Legal Interest Rate (Utah Code Section 15-1-1)

  Utah sets no statutory ceiling on the rate a lawful written, verbal, or implied contract may state; the parties may agree upon any rate. Absent an express agreement on rate, the default legal rate is 10% per annum.

• Negotiable Instrument Requirements (Utah Code § 70A-3-104)

  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.

• Statute of Limitations (Utah Code § 78B-2-309)

  Generally 6 years from a missed payment or the note's stated due date to sue to collect on a written promissory note.

• Confession of Judgment Restricted (Utah Code Section 70C-2-201)

  Utah's judicial code generally authorizes a judgment by confession (Utah Code Section 78B-5-205), but a creditor who regularly extends consumer credit for personal, family, or household purposes may not take a cognovit or confession-of-judgment clause from a debtor. A promissory note intended for general use should not include a confession-of-judgment clause.

• Criminal Usury and Business-of-Lending Exception (Utah Code Section 76-6-520)

  Knowingly engaging in, or financing, "the business of making loans" at a rate higher than authorized by law is a third degree felony. This targets an unlicensed lending business operating above a separate, more specific rate ceiling, not an isolated private note carrying a rate lawfully agreed to under Utah Code Section 15-1-1.

• Secured Transaction Filing (Utah Code Section 70A-9a-310)

  If a note is secured by personal property, the lender generally must file a financing statement (UCC-1) to perfect and prioritize its security interest against other creditors.

• Consumer Credit Protection (Utah Code § 70C-1-101 et seq.)

  The Utah Consumer Credit Code's disclosure and other requirements apply only to a "creditor" who regularly extends consumer credit for personal, family, or household purposes (more than 25 extensions of credit in the preceding calendar year, or more than 5 for a dwelling-secured transaction). An isolated private person-to-person promissory note generally does not trigger these requirements.

• Notarization Not Required for Validity (Utah Code Section 70A-3-104)

  Utah does not require a promissory note to be notarized or witnessed to be enforceable. Utah Code Section 70A-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.