Promissory Notes:

Question: What’s the difference between a promissory note and a demand note under Canadian law, and can a Ontario paralegal help you review one before you sign or enforce it?

Answer: White Owl Legal can help Ontario consumers understand whether a document is a promissory note, like an unconditional written promise to pay a “sum certain” on demand or at a fixed time, or a demand note where there is no set due date and payment becomes due upon request, including how terms like principal, interest, and the maker’s signature may affect enforceability.   In general, a promissory note is governed as an instrument under Bills of Exchange Act, R.S.C. 1985, c. B-4, and a demand-note style instrument typically becomes payable when the holder requests payment rather than on a predetermined date.   If you’re unsure about what you’re signing, disputing payment, or trying to collect, contact (289) 839-3075 to get practical help from White Owl Legal and review your document’s key terms and next steps.

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, 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.