Promissory Notes:

Question: What’s the difference between a demand promissory note and a common promissory note in Ontario, and how can Woodcock Legal Services help me before I sign anything?

Answer: ?

Answer: A promissory note is an unconditional written promise by one party (the maker/issuer) to pay a specified sum of money to another party (the payee) on demand or at a fixed or determinable future time, and the Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1) explains what counts as a promissory note. A demand note is a type of promissory note that does not set a fixed due date, so the obligation becomes payable when the holder makes a demand, while a common (time-based) promissory note typically states a specific due date or a determinable future repayment schedule. If you are reviewing or being asked to sign a note in Ontario, Woodcock Legal Services can help you understand the payment terms, interest wording, what a “demand” requires, and the practical enforcement risk so you can decide how to respond, and you can call (613) 334-6721 to get professional legal services from Ontario counsel and paralegal support as needed.

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, 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 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.