Promissory Notes:

Question: How do I tell whether a document is a promissory note or a demand note in Ontario, and what should I include before signing?

Answer: In Ontario, a promissory note is generally an unconditional written promise to pay a certain sum to a named person or bearer, either at a fixed or determinable future time or upon request, and it often lists key terms like the principal amount, repayment timing, and any interest rate; in contrast, a demand note is essentially a promissory note where there is no fixed due date and payment becomes due when the holder makes a demand. Under the Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1), a promissory note must be signed by the maker and reflect that unconditional promise in writing. If you are reviewing a draft you may be asked to sign, Denali Paralegal can help you understand what these terms mean for enforceability and timing, and whether anything in the wording could change when you have to pay; call (877) 414-4377 to discuss your situation with a paralegal serving families across Ontario.   Please avoid putting confidential details in email or online forms, and bring the document and any related correspondence to your consultation so Denali Paralegal can guide you on next steps.

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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.

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

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.