The Family Member Promissory Note is designed for use in South Africa when one family member wishes to extend a loan to another family member in a legally formal manner. This document becomes particularly important for loans of significant value, where tax implications need to be considered, or where the parties wish to avoid future misunderstandings about the loan terms. The promissory note includes essential elements such as loan amount, repayment terms, interest provisions (if any), and default consequences, while taking into account South African legal requirements including the National Credit Act, Consumer Protection Act, and Income Tax Act. It's commonly used in estate planning, wealth transfer situations, or when helping family members with major purchases such as homes or business investments. The document strikes a balance between maintaining family relationships and ensuring legal protection for all parties involved.
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1. Parties: Identification of the lender (family member) and borrower (family member) with their full legal names, identity numbers, and addresses
2. Background: Context of the family loan arrangement, relationship between parties, and purpose of the loan
3. Definitions: Key terms used in the agreement including 'Loan Amount', 'Interest Rate', 'Repayment Date', 'Default', etc.
4. Loan Amount and Purpose: Specific amount being loaned and detailed purpose for which the loan is being made
5. Interest: Interest rate (if any) and how it is calculated and compounded
6. Repayment Terms: Payment schedule, method of payment, and due dates
7. Prepayment: Terms allowing early repayment without penalty
8. Default Provisions: Circumstances constituting default and consequences thereof
9. Notices: How formal communications between parties should be made and delivered
10. General Provisions: Standard clauses including entire agreement, amendment procedures, and governing law
1. Security: Include when the loan is secured by any assets or guarantees
2. Death or Incapacity: Include when parties want to address what happens to the loan in case of death or incapacity of either party
3. Tax Implications: Include when there are specific tax considerations, especially for interest-free loans or loans above donation thresholds
4. Dispute Resolution: Include when parties want to specify mediation or arbitration before court proceedings
5. Co-signer Provisions: Include when another family member is co-signing or guaranteeing the loan
6. Acceleration Clause: Include when lender wants the right to demand full repayment under certain circumstances
1. Schedule A - Repayment Schedule: Detailed breakdown of payment dates and amounts
2. Schedule B - Security Details: Description of any assets provided as security (if applicable)
3. Appendix 1 - Proof of Relationship: Documentation proving family relationship (if required for tax or legal purposes)
4. Appendix 2 - Loan Disbursement Details: Banking or payment details for the loan disbursement
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