Promissory Notes:

Question:Do I have a promissory note or a demand note, and how does payment get triggered in Ontario?

Answer:A promissory note is an unconditional written promise by the maker to pay a sum certain to the payee on demand or at a fixed or determinable future time, while a demand note is effectively a promissory note with no fixed due date so the amount becomes due when payment is demanded; under the Bills of Exchange Act R.S.C. 1985, c. B-4, a promissory note must be signed and clearly promise payment either “on demand” or at a determinable time, and it typically sets out principal, interest (if any), and parties’ details. If you’re in Ontario and need help identifying what your document means for payment timing, enforcement, and next steps, DK Legal Practice assists with paralegal support for debt and payment issues, so call (416) 906-6663 today to get clear, practical guidance.

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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 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.

Note: Please contact DK Legal Practice by phone at: (416) 906-6663 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.  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

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 promissory notes without a specific due date as such a note becomes due upon demand 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.