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 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 Denali Paralegal by phone at: (877) 414-4377 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 promissory notes without a specific due date as such a note becomes due upon demand of payment.

Summary Comment

A promissory note is a negotiable instrument and could consist as a cheque, loan agreement, or other document evidencing indebtedness.