Promissory Notes:

Question:How do I tell whether a document is a promissory note or a demand note in Ontario?

Answer:VP Legal Services & Notary can help you understand whether your payment document is a promissory note or a demand note by reviewing the wording for an unconditional written promise, a signed maker, a sum certain, and whether repayment is due on demand or at a fixed or determinable time.  Under the Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1), a promissory note is payable on demand or at a determinable future time, and a demand note is the version with no specific due date because it becomes due when the holder demands payment.  If you need document guidance before you sign, enforce, or respond to a payment demand, contact (437) 286-1499 for paralegal and notary support across Ontario.

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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 VP Legal Services & Notary by phone at: (437) 286-1499 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.