Promissory Notes:

Question: What’s the difference between a promissory note and a demand note in Ontario, and what terms should be included?

Answer: In Ontario, a promissory note is a signed written promise to repay a specific sum (often with interest) either on a set date or when payment is demanded, while a demand note is simply a promissory note with no fixed due date that becomes payable when the lender makes a demand, typically requiring clear terms for the principal, interest rate, parties, issue date, repayment method, default and remedies, and signature lines, as reflected in Bills of Exchange Act, R.S.C. 1985, c. B-4.   Benchmark Legal Offices is a Paralegals and Lawyers’ Office to Serve You, offering practical, cost-effective help drafting, reviewing, and enforcing promissory and demand notes across Ontario, so call (289) 389-8840 to protect your repayment rights and reduce dispute risk.

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, 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

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 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.