Promissory Notes:

Question: What is the difference between a demand note and a common promissory note in Canada?

Answer: A demand note is a promissory note with no fixed due date and it becomes payable when the maker receives a demand for payment, while a common promissory note has a specified repayment date or determinable future time and sets out the parties, principal (sum certain), and often any interest terms. Under the Bills of Exchange Act, R.S.C. 1985, c. B-4, the key definition is that a promissory note is an unconditional written promise signed by the maker to pay a sum certain on demand or at a fixed or determinable future time. If you need help reviewing wording, enforcing repayment, or responding to a payment demand, Woodcock Legal Services provides professional legal services in Ontario, call (613) 334-6721 for guidance.

Add this website to Google Preferred Sources

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.

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, 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 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.