Promissory Notes:

Question: What’s the difference between a demand note and a common promissory note in Ontario, and how can Freed Legal Services help me if I’m trying to tell what I signed or received?

Answer: A promissory note is an unconditional promise in writing by one party (the maker) to pay a certain money amount to another party, either on demand or at a fixed or determinable future time, and Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1) defines a promissory note as an unconditional promise in writing made by one person to another, signed by the maker, to pay on demand or at a fixed or determinable future time.   A demand note is essentially a promissory note with no fixed due date, meaning it becomes payable when the holder makes a demand for payment, while a “common” promissory note typically sets a specific due date or repayment schedule.   In Ontario, if you need to understand whether the document you received is payable on demand, what terms like principal and any interest apply, and what it means for collections or a dispute, Freed Legal Services can assist paralegals in reviewing the paperwork, explaining your options, and helping you respond appropriately, call (800) 716-1897 for support.

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.  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.