Promissory Notes:

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

Answer: Benchmark Legal Offices can help you understand what counts as a promissory note and what a demand note means in practical Ontario terms for repayment. A promissory note is an unconditional written promise, signed by the maker, to pay a specific amount to a named person or bearer on demand or at a fixed or determinable future time, as defined in Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1).  A demand note is essentially a promissory note with no fixed due date, so it becomes payable when the holder makes a demand for payment (instead of on a stated calendar date).  In real-world documents, both should clearly identify the parties, principal amount, and payment terms, and they may include interest terms; if you’re reviewing wording, you can call (289) 389-8840 to speak with the paralegals and lawyers’ office at Benchmark Legal Offices and get help assessing how your note may be treated and enforced.

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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.  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 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.