Promissory Notes:

Question: What’s the difference between a demand note and a regular promissory note in Ontario, and how do I tell which one I’m holding?

Answer: In Ontario, a paralegal at Askew Paralegal Services can help you understand whether your document is a promissory note or specifically a demand note by checking whether it contains an unconditional written promise to pay a sum certain either “on demand” or at a fixed or determinable future time;  a promissory note is defined as an unconditional promise in writing signed by the maker to pay on demand or at a fixed or determinable future time, which is set out in Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1), while a demand note is a promissory note without a specified due date, becoming due when the holder requests payment;  if you want help reviewing the wording, parties, payment terms, and any interest or bearer language, call (289) 439-4740 to book a consultation with Askew Paralegal Services for practical guidance on next steps.

Understanding What Constitutes As a Promissory Note and What Is Meant By a Demand Note Versus a Common Note

A promissory note is a form of negotiable instrument whereby a party (the issuer) makes an unconditional promise in writing to pay a sum of money to another party (the payee).  Payment becomes due under a promissory note at fixed time stated within the promissory note or upon receipt of a demand for repayment. A promissory note will also contain details of any applicable terms such as a rate of accruing interest, if any.

The Law

The Bills of Exchange Act, R.S.C. 1985, c. B-4, governs financial instruments such as currency, cheques, among other things, and defines a promissory note as:

A promissory note is a contract between two parties, the borrower and the lender.  A bank note is a type of promissory note issued by a bank or other financial institution.  In either circumstance, a promissory note is a written promise to pay a certain amount of money to a specific person or a specific entity at a specific time and under certain conditions.  However, unlike a promissory note, a bank note is backed by the assets of a bank and is therefore more secure.

Terms Upon Notes

Usual terms that may be shown upon a note include the principal amount due, the applicable interest rate, the parties to the note including a party who may be unspecified and simply known as a "bearer of note", the date of issue, the repayment terms, and the due date.

Payable Upon Demand

Demand notes are promissory notes without a specific due date as such a note becomes due upon demand of payment.

Summary Comment

A promissory note is a legal document that states a promise to pay a certain amount of money. A promissory note may take the form of a cheque, loan agreement, or other document, that serves as proof of an outstanding debt.