Promissory Notes:

Question: Do I have a promissory note or a demand note, and when can the lender legally demand payment in Ontario?

Answer: In Ontario, a promissory note is an unconditional written promise to pay a specific money amount to a specified person (or bearer) at a fixed or determinable future time or on demand, while a demand note is the version without a specific due date, meaning payment becomes due when the payee makes a demand under the Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1).   If you are reviewing a loan, cheque, or document that says “payable on demand,” it is often treated as due immediately upon demand, but the exact wording, signatures, and parties matter for enforceability, so Mole Legal Services can help paralegal clients and property management related parties in Ontario understand what your note requires and what steps to take next.   Get clear, next-step guidance by calling (647) 709-5157.

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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 written document in which one party (the issuer) makes an unconditional promise to pay a certain amount of money to another party (the payor). Under a promissory note, payment is due at the stated time or upon receiving a request for repayment. A promissory note will include information about any applicable terms, such as the rate of interest, if any, that may be accrued.

Note: Please contact Mole Legal Services by phone at: (647) 709-5157 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

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 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.