Which of the following is an example of a prohibited statement in a promissory note?

• A. A clause outlining late fees
• B. A refusal of liability
• C. A disclaimer on loan amounts
• D. A statement of loan conditions

Answer: (B)

A refusal of liability in a promissory note is considered a prohibited statement because it undermines the fundamental purpose of the note, which is to create a binding agreement between the borrower and the lender for the repayment of a loan. A promissory note serves as a legal instrument affirming that the borrower is responsible for repaying the amount borrowed according to specified terms. Including a statement that attempts to absolve one party from liability contradicts this principle and could render the note unenforceable.

In contrast, clauses that outline late fees, disclaimers on loan amounts, and statements of loan conditions are generally accepted components of a promissory note. These elements serve to clarify the terms of the agreement and ensure that both parties understand their obligations, thus enhancing transparency in the lending transaction.