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Earnest Money Promissory Note for India

Earnest Money Promissory Note Template for India

An Earnest Money Promissory Note is a legally binding financial instrument under Indian law that documents a promise to pay a specified sum as earnest money or good faith deposit. The document is governed by the Negotiable Instruments Act, 1881, and the Indian Contract Act, 1872, providing a formal structure for earnest money transactions. It includes essential details such as the principal amount, payment terms, parties involved, and consequences of default. The document serves as evidence of the maker's commitment to pay and can be used in legal proceedings if enforcement becomes necessary.

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What is a Earnest Money Promissory Note?

The Earnest Money Promissory Note is a crucial document in Indian business transactions where a party needs to demonstrate serious intent through a financial commitment. This document is typically used in real estate transactions, major commercial deals, or any situation requiring a good faith deposit. The note must comply with Indian legislation, particularly the Negotiable Instruments Act, 1881, and the Indian Contract Act, 1872. It contains specific details about the promised payment, including amount, terms, and conditions. The document provides security to the recipient while creating a legally enforceable obligation for the maker. An Earnest Money Promissory Note is particularly valuable in situations where parties want to formalize their commitment before proceeding with a larger transaction.

What sections should be included in a Earnest Money Promissory Note?

1. Date and Place: Specifies the date of execution and location where the note is made

2. Parties: Identifies the maker (promisor) and payee (promisee) with full legal names and addresses

3. Promise to Pay: Clear statement of unconditional promise to pay, including the principal amount in both figures and words

4. Purpose: Specifies that this is for earnest money in relation to a specific transaction

5. Payment Terms: Details of when and how the payment will be made, including due date and payment method

6. Interest Rate: Specifies whether interest applies and if so, the rate and calculation method

7. Default Provisions: Consequences of default and acceleration clause

8. Governing Law: Specifies that Indian law governs the promissory note

9. Signature Block: Space for signatures of maker, witness(es), and notary if required

What sections are optional to include in a Earnest Money Promissory Note?

1. Collateral: Include when the note is secured by specific assets or property

2. Prepayment Terms: Include when early payment is allowed and any associated conditions

3. Late Payment Penalties: Include when specific penalties for late payment are to be imposed

4. Assignment Clause: Include when the note needs to be transferable

5. Co-signer Details: Include when there is a guarantor or co-signer for the note

6. Dispute Resolution: Include when specific arbitration or mediation procedures are required

What schedules should be included in a Earnest Money Promissory Note?

1. Payment Schedule: If payments are to be made in installments, details the dates and amounts of each payment

2. Collateral Description: If applicable, detailed description of any assets serving as collateral

3. Related Transaction Details: References to the main transaction for which the earnest money is being provided

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

India

Publisher

Ƶ

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions




















Clauses




















Relevant Industries

Real Estate

Commercial Property

Industrial Manufacturing

Construction

Retail

Professional Services

Technology

Agriculture

Infrastructure Development

Healthcare

Hospitality

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Real Estate

Business Development

Corporate Secretarial

Operations

Commercial

Relevant Roles

Chief Financial Officer

Finance Manager

Legal Counsel

Real Estate Manager

Contract Manager

Business Development Manager

Treasury Manager

Risk Manager

Company Secretary

Compliance Officer

Property Manager

Transaction Manager

Legal Director

Financial Controller

Industries





Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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