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 form of negotiable instrument whereby a party (the issuer) makes an unconditional promise in writing to pay a sum of money to another party (the payee).  Payment becomes due under a promissory note at fixed time stated within the promissory note or upon receipt of a demand for repayment. A promissory note will also contain details of any applicable terms such as a rate of accruing interest, if any.

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, 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 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.