Promissory Notes:

Question: What’s the difference between a promissory note and a demand note in Ontario, and what terms should be included to make it enforceable?

Answer: A promissory note is a written, signed promise to repay a specific sum to a named person (or bearer) either on demand or at a set future time, while a demand note has no fixed due date and becomes payable when the lender demands payment; in Canada these instruments are defined under Bills of Exchange Act, R.S.C. 1985, c. B-4.   Civil Litigations Paralegal Services is an Ontario Paralegal service that can draft or review notes, confirm key terms (principal, interest, payment schedule, default remedies, and signatures), and help you pursue repayment efficiently, so call (416) 229-1479 to get started.

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, 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

A promissory note will typically include details of the principal amount due, the applicable interest rate, the parties involved including a "bearer of note" if a party is unspecified, the date of issue, the repayment terms, and the due date.

Payable Upon Demand

Demand notes are a type of promissory note but differ whereas a demand note lacks a specified due date and instead becomes due upon request of payment.

Summary Comment

A promissory note is a negotiable instrument and could consist as a cheque, loan agreement, or other document evidencing indebtedness.