An IOU is an informal document used to record a debt or promise of payment. It’s also known as a “promissory note,” and it serves as a legally binding agreement between two parties. The IOU outlines the terms of the arrangement – including the amount due, how it will be paid, when it is expected to be paid, and any interest that may be associated with the loan. In the event of a dispute or default on the agreement, an IOU has the same legal standing as any other written contract. With a well-drafted IOU in place, both parties can rest assured that their agreement is enforceable under the law.