Promissory Notes:

Question: Is a demand note the same as a promissory note, and when can a lender demand payment in Ontario?

Answer: In Ontario, a promissory note is an unconditional written promise to pay a specified sum to a named person or bearer on demand or at a fixed or determinable future time, while a demand note is a promissory note with no fixed due date and becomes payable when the issuer makes a payment request. Under Bills of Exchange Act, R.S.C. 1985, c. B-4, the note must be a signed, written promise to pay a sum certain on demand or at a set time, and typical terms include principal, interest (if any), parties, issue date, and repayment terms. If you are dealing with a note you received or issued, SFG Paralegal Services LLP can help a paralegal review the wording and payment demand to explain your options and next steps; call (888) 398-0121 for guidance in Ontario.

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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 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 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.