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 written document in which one party (the issuer) makes an unconditional promise to pay a certain amount of money to another party (the payor). Under a promissory note, payment is due at the stated time or upon receiving a request for repayment. A promissory note will include information about any applicable terms, such as the rate of interest, if any, that may be accrued.

Note: Please contact Legacy Legal Services by phone at: (226) 246-3825 to discuss any specific questions that you may have.

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