Promissory Notes:

Question: Is a demand note a promissory note, and when does it become due in Ontario?

Answer: A demand note is a promissory note that has no fixed maturity date, so it becomes due when the holder makes a demand for payment, unlike a common note that is payable at a fixed or determinable future time; under the Bills of Exchange Act, R.S.C. 1985, c. B-4, the note must be an unconditional promise in writing signed by the maker to pay a sum certain on demand or at a set time, and it typically lists the principal amount, interest terms (if any), the parties, and the repayment obligation.   If you are dealing with a demand note or trying to enforce or defend a debt in Ontario, the paralegal team at Anderson Aylwin Begg & Co. can help you organize the document, confirm what payment is owed, and prepare next steps for correspondence or small claims.   Book a consult at (905) 686-8080 to get practical guidance for your situation.

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, 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 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.