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 legal document that binds one party (the issuer) to pay a specified amount of money to another party (the payor). The payor is legally obligated to make payment at the predetermined time or upon receiving a demand for repayment from the issuer. A promissory note will detail any applicable terms, including the rate of interest, if applicable, 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 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 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.