Promissory Notes:

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

Answer: In Ontario, a promissory note is an unconditional written promise signed by the maker to pay a specified sum of money to a specified person or bearer on demand or at a fixed or determinable future time, and it may include terms like interest, principal, and repayment dates;   a demand note is a type of promissory note that has no fixed due date and becomes payable when the holder makes a request for repayment. The definition is reflected in Bills of Exchange Act, R.S.C. 1985, c. B-4, at section 176(1). If you received one or are preparing to enforce or respond to a note in a debt situation, paralegals at Gutoski Legal Services can review the wording, confirm when repayment is due, and explain practical next steps. Call (289) 902-0227 to discuss your document and your timeline in Ontario.

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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 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.

Note: Please contact Gutoski Legal Services by phone at: (289) 902-0227 to discuss any specific questions that you may have.

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 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.