Promissory Notes:

Question: Do I have a promissory note or a demand note, and what should I do in Ontario if someone is trying to collect on it?

Answer: Freed Legal Services can help you determine whether a document is a promissory note under Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1), and whether it is payable on demand (a demand note with no fixed due date) versus a common note with a fixed or determinable repayment date.  A paralegal can review what the issuer promised to pay, who the maker and payee are, whether it is unconditional, the principal and any interest terms, and what “demand” means in your specific language, so you understand your options before making payments or responding to a collection attempt.  Call (800) 716-1897 to discuss your document and next steps, including how demand-based collection timelines and proof requirements can affect your position 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 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

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.