Promissory Notes:

Question: Can a demand note be treated the same as a promissory note in Ontario, and when can the lender demand payment?

Answer: In Ontario, a promissory note is a written, unconditional promise to pay a certain sum, either at a fixed or determinable future time or “on demand,” and the Bills of Exchange Act defines a promissory note as such an unconditional promise in writing (including payment on demand) in Bills of Exchange Act, R.S.C. 1985, c. B-4. A demand note is essentially a promissory note with no fixed due date, meaning the amount becomes due when the holder makes a formal demand for payment.  If you are dealing with whether your document is a true demand note or a common note with a scheduled due date, Legacy Legal Services can help legal professionals and borrowers in Ontario sort out the terms, dates, and who is entitled to payment.  Call (226) 246-3825 to discuss your situation and next steps with a paralegal.

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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.

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 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.