Wilkins Micawber as illustrated in a 1912 edition of David Copperfield
An IOU is a signed document acknowledging a debt.
IOU is now understood as representing the pronunciation of I owe you, but it was (perhaps) originally an acronym of I owe unto, followed by the name of the creditor.
In 1893, Richard Bithell defined the IOU in A Counting-house Dictionary: Containing an Explanation of the Technical Terms used by Merchants and Bankers in the Money Market and on the Stock Exchange with a Minute Description of the Coins on which the Exchanges of the World are based and in Terms of which Prices are quoted:
I O U. A recognized contraction of the sentence, ‘I owe you.’ It is a simple acknowledgment of indebtedness to some particular person. As it is neither a promissory note nor a receipt, it requires no stamp. It is not a negotiable instrument, but as it is an acknowledgment of a debt, that debt can be sued for at any time, and is so far equal to a promissory note payable on demand. The following simple form of I O U should be adhered to since any addition to or deviation from it by inexperienced hands might render it invalid:
If any words were added which might be construed into a promise, it would then become a “promissory note,” and would be invalid without a stamp. Hence the necessity of care when interest is to be paid; for it promises to pay interest only, no stamp is required, but if it were so worded as to imply a promise to repay the principal at a given date, it would require a stamp like any ordinary promissory note.
The earliest known occurrence of IOU dates back to 1618, in The Court and Country, or A Briefe Discourse betweene the Courtier and Country-man; of the Manner, Nature, and Condition of their liues, by the poet Nicholas Breton (circa 1555-1626):
Now we in the Country beginne and goe forward with our reading in this manner, Christs Crosse be my speed*, and the Holy Ghost: for feare the Diuell should be in the letters of the Alphabet, as hee is too often when hee teacheth od fellowes play tricks with their Creditors, who in stead of payments, write I O V, and so scoffe many an honest man out of his goods.
(* This formula is explained in criss-cross.)
In David Copperfield, an 1850 novel by Charles Dickens, Wilkins Micawber is a constantly impoverished but always optimistic gentleman. In chapter 36, seeking to clean up his affairs as he readies himself to migrate from London to Australia, he declares:
“One thing more I have to do, before this separation is complete, and that is to perform an act of justice. My friend Mr. Thomas Traddles has, on two several occasions, ‘put his name’, if I may use a common expression, to bills of exchange for my accommodation. On the first occasion Mr. Thomas Traddles was left – let me say, in short, in the lurch. The fulfilment of the second has not yet arrived. The amount of the first obligation,” here Mr. Micawber carefully referred to papers, “was, I believe, twenty-three, four, nine and a half, of the second, according to my entry of that transaction, eighteen, six, two. These sums, united, make a total, if my calculation is correct, amounting to forty-one, ten, eleven and a half. My friend Copperfield will perhaps do me the favour to check that total?”
I did so and found it correct.
“To leave this metropolis,” said Mr. Micawber, “and my friend Mr. Thomas Traddles, without acquitting myself of the pecuniary part of this obligation, would weigh upon my mind to an insupportable extent. I have, therefore, prepared for my friend Mr. Thomas Traddles, and I now hold in my hand, a document, which accomplishes the desired object. I beg to hand to my friend Mr. Thomas Traddles my I.O.U. for forty-one, ten, eleven and a half, and I am happy to recover my moral dignity, and to know that I can once more walk erect before my fellow man!”
With this introduction (which greatly affected him), Mr. Micawber placed his I.O.U. in the hands of Traddles, and said he wished him well in every relation of life. I am persuaded, not only that this was quite the same to Mr. Micawber as paying the money, but that Traddles himself hardly knew the difference until he had had time to think about it. Mr. Micawber walked so erect before his fellow man, on the strength of this virtuous action, that his chest looked half as broad again when he lighted us downstairs.