Promissory notes are legal documents whereby the maker of a note promises to pay a certain amount of money to a payee. In Missouri, promissory notes are interpreted consistent with contract law. Every promissory note will contain repayment terms and usually include interest that accrues. Generally, payments are set on fixed dates or on the demand of the payee. A “demand note” is when the payee can in his/her/its discretion state that the entire sum is now due and payable. Brown v. Maguire’s Real Estate Agency, 121 S.W.2d 754 (Mo. 1938). An “installment note” is when the maker is required to make certain payments on or before fixed dates. Many notes, however, utilize components of both a demand and installment. It is typical for a promissory note to set forth specific installment dates and further provide that if an installment is missed then the payee can demand that the whole amount is payable and due immediately. It is also common for promissory notes to include very specific protections for collection procedures.
If you are contemplating litigation about a promissory note, or have been named as a defendant in a promissory note suit, it is extremely important to identify whether the the note is a demand note or installment note to determine the applicable statue of limitations. For a demand note, the statute of limitations begins to run whenever demand is made. Centerre Bank of Kansas City, N.A. v. Distributors, Inc., 705 S.W.2d 42, 47-48 (Mo. Ct. App. 1985). For an installment note, the statute of limitations “commences to run on…the date the last installment of the note is due.” Ryerson v. Hemar Ins. Corp. of America, 200 S.W.3d 170 (Mo. Ct. App. 2006). The date the limitations period begins to run can vary greatly depending on the nature of the note. If a suit is not brought within the correct statute of limitations, it may be time-barred and susceptible to dismissal.