Promissory Notes:

Question: How are demand notes different from promissory notes under Ontario law?

Answer: Thamar Bilingual Legal Services Ontario can help you understand what a promissory note is, what makes it enforceable, and how a demand note differs because it has no fixed due date and becomes payable when the holder requests payment.   In Canada, a promissory note is an unconditional written promise to pay a specified money amount on demand or at a fixed or determinable future time, as defined in Bills of Exchange Act, R.S.C. 1985, c. B-4.   A typical note sets out key terms like the principal, interest (if any), parties, issue date, and payment terms, while a demand note is triggered by demand rather than a set maturity date.   If you need bilingual (English, français) paralegal support with note wording, repayment disputes, or next steps in Ontario, call (647) 818-7974 for guidance.

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

A promissory note is a written document in which one party (the issuer) makes an unconditional promise to pay a certain amount of money to another party (the payor). Under a promissory note, payment is due at the stated time or upon receiving a request for repayment. A promissory note will include information about any applicable terms, such as the rate of interest, if any, that may be accrued.

The Law

The Bills of Exchange Act, R.S.C. 1985, c. B-4, addresses promissory notes as a form of financial instrument, along with currency, cheques, among other things, and specifically defines a promissory note as:

A promissory note is a contract between two parties, the borrower and the lender, where the borrower agrees to pay a certain amount of money to the lender at a specific time and under certain conditions. A bank note is a type of promissory note issued by a bank or other financial institution; but, it is backed by the assets of the bank which makes a bank note more secure than a regular promissory note.

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.