IOUs have legal effect. An IOU is a legal agreement between a borrower and a lender that the lender will lend money to the borrower and the borrower will return the loan and pay interest when due. A contract established in accordance with the law shall take effect from the time of its establishment. The basic contents of the IOU include: creditor's name, loan amount (domestic and foreign currency), interest calculation, repayment time, default (delayed repayment) penalty, dispute handling method, as well as the debtor's name, loan date and other essentials. As long as the creditor's name, loan amount, debtor's name and loan date are present (even if they are added later), they meet the main requirements of the IOU and are therefore legally valid. Once a dispute arises, it can be used as evidence to claim creditor's rights in the People's Court, and the People's Court will also accept it.

A loan contract is a contract in which the borrower borrows money from the lender and returns the loan and pays interest when due. The loan contract shall be in written form, unless otherwise agreed on the loan between natural persons. The content of a loan contract generally includes terms such as loan type, currency, purpose, amount, interest rate, term and repayment method. When entering into a loan contract, the borrower shall provide the true situation of business activities and financial status related to the loan as required by the lender. If the borrower fails to repay the loan within the agreed time limit, it shall pay overdue interest in accordance with the agreement or relevant national regulations. As a civil legal act, a contract is only qualified to be concluded by those who have the corresponding civil capacity; contracts entered into by persons who do not have the corresponding civil capacity are contracts whose validity is yet to be determined. However, a person without corresponding civil capacity may enter into a contract through his legal agent. The actor's corresponding civil capacity means that the actor who entered into the contract has the corresponding capacity to express his will when entering into the contract, but it does not mean that the parties to the contract have the corresponding civil capacity. This also means that the actor may be a party to the contract or not, that is, the actor may be the same person as the party to the contract, or there may be inconsistencies.

Legal basis:

Civil Code

Article 502

A contract established in accordance with the law shall take effect from the time of establishment , except where otherwise provided by law or otherwise agreed upon by the parties. In accordance with the provisions of laws and administrative regulations, if the contract should be subject to approval and other procedures, the provisions shall be followed. If the failure to go through approval and other procedures affects the effectiveness of the contract, it will not affect the effectiveness of the contract's obligation clauses such as submission for approval and related clauses. If the party that should go through the application approval and other procedures fails to perform its obligations, the other party may request that it bear liability for violating such obligations. In accordance with the provisions of laws and administrative regulations, if the modification, transfer, termination, etc. of a contract require approval and other procedures, the provisions of the preceding paragraph shall apply.

Article 667

A loan contract is a contract in which the borrower borrows money from the lender and returns the loan and pays interest when due.

Article 667

A loan contract is a contract in which the borrower borrows money from the lender and returns the loan and pays interest when due.

Article 668

A loan contract shall be in writing, unless otherwise agreed upon for a loan between natural persons. The content of a loan contract generally includes terms such as loan type, currency, purpose, amount, interest rate, term and repayment method.

Article 669

When entering into a loan contract, the borrower shall provide the true situation of business activities and financial status related to the loan as required by the lender.

Article 670

The interest on the loan shall not be deducted from the principal in advance. If interest is deducted from the principal in advance, the loan shall be returned and interest calculated based on the actual borrowed amount.