Promissory Notes:

Question: What’s the difference between a demand promissory note and a common promissory note in Ontario, and when can the lender demand payment?

Answer: Lo Greco Law can help you understand how promissory notes work and what a demand note means in practice, including the effect of an “unconditional promise in writing” and the fact a demand note becomes payable upon request rather than on a fixed date   Under Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1), a promissory note is a signed, unconditional promise to pay a sum certain on demand or at a fixed or determinable future time, so a common note typically has a stated due date while a demand note has no fixed maturity   If you are facing a repayment demand or you received a note that you think is unclear or enforceable against you, get 30+ year experienced lawyer services with LSO tribunal representation across Ontario by calling (416) 488-4110 for a consultation.

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, 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 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.