Final answer:
The act of refraining from taking legal action when a promissory note payment is late is known as a waiver. The correct option is C.
Step-by-step explanation:
The correct answer to the question "Refraining from taking legal action when a promissory note payment is late is called what?" is C) Waiver. A waiver is the voluntary act of refraining from enforcing a right, claim, or privilege. It implies that the holder of the promissory note chooses not to enforce the payment deadline or action related to the note's terms.
This is different from default, which is the failure to meet the legal obligations of a loan, forfeiture, which means losing a right or property as a penalty for some illegal act, and rescission, which means the cancellation of a contract.