Promissory Notes:

Question: What’s the difference between a demand promissory note and a common promissory note, and how does it affect when a lender can ask for payment?

Answer: DK Legal Practice (Paralegal) in Ontario can help you understand what counts as a promissory note and what makes a demand note different from a common note so you know when payment is truly due under Canadian law, including that a promissory note is an unconditional promise in writing that becomes payable on demand or at a fixed or determinable future time, per Bills of Exchange Act, R.S.C. 1985, c. B-4.   A demand note has no specific due date because the amount becomes payable when the payee demands repayment, while a common promissory note has a stated due date or repayment schedule, which can affect your timelines, defences, and next steps. If you have a note and want plain-language guidance on what it means and what you should do in Ontario, call (416) 906-6663 to book a consultation.

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, 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

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 negotiable instrument and could consist as a cheque, loan agreement, or other document evidencing indebtedness.