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An IOU Agreement is a simple written promise to repay money borrowed from someone else. While less formal than a loan contract, it's still a legally binding document under Australian contract law when it includes key details like the amount, repayment date, and both parties' signatures.

Australian courts generally recognize IOUs as valid debt instruments, though they're most commonly used for personal loans between friends and family. To be enforceable, the agreement should clearly state the loan terms and be signed by the borrower. While verbal IOUs exist, having a written record makes it much easier to resolve disputes or collect unpaid debts through legal channels.

Use an IOU Agreement when lending money informally to friends, family, or business associates in Australia. This document works perfectly for smaller personal loans where you need something more concrete than a handshake but less complex than a formal loan contract. It's especially valuable when lending amounts over $500, where having written proof becomes important.

The arrangement fits situations like helping a mate with unexpected car repairs, lending money to a family member for a house deposit, or covering temporary cash flow gaps for trusted business contacts. Many people choose IOUs because they're quick to create, legally valid, and help maintain clear expectations without damaging personal relationships.

• Basic IOU: A simple one-page document stating the amount borrowed and repayment date, ideal for small personal loans
• Secured IOU: Includes specific assets as collateral to back the loan, offering more protection for larger amounts
• Installment IOU: Details a repayment schedule with multiple payments over time, commonly used for longer-term arrangements
• Business IOU: More detailed version including business-specific terms, interest rates, and default provisions
• Family IOU: Simplified format often used between relatives, typically including flexible repayment terms and minimal interest

• Lenders (Creditors): Individuals or small business owners who provide the money and keep the IOU Agreement as proof of the debt
• Borrowers (Debtors): People receiving the loan who sign the IOU and commit to repayment terms
• Family Members: Often use IOUs for intergenerational loans or helping relatives with major purchases
• Business Partners: May exchange IOUs for short-term cash flow support or project funding
• Legal Advisors: Sometimes consulted to review IOU terms or assist with enforcement if payment issues arise

• Loan Details: Record the exact amount being borrowed and the agreed repayment date or schedule
• Party Information: Gather full legal names, addresses, and contact details of both lender and borrower
• Interest Terms: Decide if interest applies and document the rate clearly
• Payment Method: Specify how repayment will occur (bank transfer, cash, etc.)
• Security Details: Note any assets being used as loan security, if applicable
• Signatures: Arrange for both parties to sign and date, with a witness present if possible

• Identification: Full legal names and addresses of both lender and borrower
• Loan Amount: The exact sum being borrowed, written in both numbers and words
• Payment Terms: Clear repayment date or schedule, including any installment arrangements
• Interest Details: Any interest rate applied and how it's calculated
• Default Provisions: Consequences of missed payments or breach of terms
• Signatures: Dated signatures of both parties, with optional witness signature
• Governing Law: Statement that Australian law applies to the agreement

An IOU Agreement differs significantly from a Contractual Agreement in several key ways. While both are legally binding documents, they serve different purposes and come with distinct legal implications under Australian law.

• Formality Level: IOUs are typically informal documents used for personal loans, while Contractual Agreements are formal business documents with comprehensive terms and conditions
• Scope of Terms: IOUs focus solely on money owed and repayment terms, whereas Contractual Agreements cover broader obligations, conditions, and performance requirements
• Legal Complexity: IOUs are intentionally simple, often just one page, while Contractual Agreements usually require detailed clauses covering contingencies, dispute resolution, and termination rights
• Typical Usage: IOUs are common among friends, family, or small business associates, while Contractual Agreements are used for formal business relationships and commercial transactions