Promissory Notes:

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

Answer:In Ontario, a promissory note is an unconditional written promise to pay a specified sum of money at a fixed or determinable future time or “on demand,” usually setting out the principal, parties, issue date, repayment terms, and any interest; by definition under the Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1.   A demand note is simply a promissory note with no specific due date, so it becomes due when the payee makes a formal demand for payment.   If you need help drafting, reviewing, or enforcing a note, Wennekers.Legal™ provides professional legal services in Ontario; call (647) 701-1162 for practical next steps.

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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 form of negotiable instrument whereby a party (the issuer) makes an unconditional promise in writing to pay a sum of money to another party (the payee).  Payment becomes due under a promissory note at fixed time stated within the promissory note or upon receipt of a demand for repayment. A promissory note will also contain details of any applicable terms such as a rate of accruing interest, if any.

Note: For immediate help, please contact Wennekers.Legal™ by phone at: (647) 701-1162 to retain services or to discuss any specific questions that you may have.

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.