Promissory Notes:

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

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 repayment is demanded, while a demand note has no fixed due date and becomes payable as soon as the lender demands payment; Paladin LLP is a Paralegal service that helps you understand note terms, document repayment expectations, and take practical steps to enforce or respond to a demand across Ontario, call (289) 925-1572 to get started.  If your note’s enforceability matters, confirm it’s in writing, signed, names the payee, states the amount, and clearly sets when payment is due so you can act quickly and avoid costly disputes.

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, 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.