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.

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

Usual terms that may be shown upon a note include the principal amount due, the applicable interest rate, the parties to the note including a party who may be unspecified and simply known as a "bearer of note", 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 negotiable instrument and could consist as a cheque, loan agreement, or other document evidencing indebtedness.