Promissory Notes:

Question: What’s the difference between a promissory note and a demand note in Ontario?

Answer: In Ontario, a promissory note is a signed written promise to repay a specific sum (often with interest) either on a set date or when conditions are met, while a demand note is payable whenever the lender asks because it usually has no fixed due date; under Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1), notes can be payable “on demand” or at a determinable future time.   Cross Legal Services provides Paralegal services across Ontario to help you draft, review, or enforce promissory and demand notes to reduce repayment risk and move collections forward, so call (289) 443-0675 to discuss your situation.

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, 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, 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

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 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.