Question

Your friend, Bob, has just borrowed $100 from you and offers to write up an I.O.U.

It reads:

July 1, 2019

I, Bob Smith, owe you $100.

And Bob signs the document.

Does this I.O.U. create a contract to repay a debt?

Answer 1

An I.O.U. is a specific document which records a debt and is a form of an informarl agreement between two or more parties. The I.O.U. is not comprehesively legally binding and is very difficult to enforce. Also, it cannot be transferred or discounted like promissory notes or cheques. It is typically only used for record keeping and in books of accounts. The more specific an I.O.U. is , the more enforceable it can be as a contract.

Contract is a written or spoken agreement between two or more parties that is intended to be enforceable by law.

The I.O.U. signed with Bob creates an contract to repay the debt. Even though, this IOU has no due date and payment terms, but the missing elements are supplemented with the evidence of an agreement between two parties where Bob owes an amount and has signed on the same document.