Promissory Notes:

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

Answer: A promissory note is an unconditional written promise to pay a specific sum of money, either at a fixed or determinable future time or on demand, typically including parties, principal, interest terms, issue date, and due date.   A demand note is a type of promissory note where there’s no fixed due date, so payment becomes due when the holder makes a demand.   In Ontario, if you’re dealing with a loan, business debt, or paperwork that looks like a note, PKM Legal Services can help you understand whether it’s truly a promissory note versus a demand note and what that means for enforcement and repayment.   Call (519) 410-5250 to speak with a paralegal at PKM Legal Services and get practical next steps fast.

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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: Please contact PKM Legal Services by phone at: (519) 410-5250 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

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.