Promissory Notes:

Question:How do I tell the difference between a promissory note and a demand note under Canadian law in Ontario?

Answer:In Ontario, Ajodhia Legal Services can help you understand what counts as a promissory note and whether a document is a demand note versus a common note. A promissory note is an unconditional written promise signed by the maker to pay a sum certain to a specified person or to bearer, on demand or at a fixed or determinable future time, and it typically includes key terms like principal, interest rate, parties, issue date, and repayment conditions under Bills of Exchange Act, R.S.C. 1985, c. B-4, 176(1). A demand note is a promissory note that does not set a specific due date, meaning the amount generally becomes payable when the payee makes a demand for repayment, while a common (non-demand) note becomes due at a stated fixed or determinable future time. If you are being asked to pay, disputing the terms, or wondering whether you have a legal duty to pay, call (647) 882-8205 for prompt paralegal guidance 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 Ajodhia Legal Services by phone at: (647) 882-8205 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

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.