Promissory Notes:

Question: What is the difference between a demand promissory note and a common (fixed-term) promissory note in Ontario, and when does payment become due?

Answer: Bulat Paralegal Service can help you understand whether a written promise to pay is due on demand or only at a fixed or determinable future time, what terms to look for (like interest and the “sum certain” requirement), and how to respond if you’re being asked to pay before a stated due date in Ontario.   A demand note generally becomes payable immediately upon the holder’s demand because it has no specific due date, while a common note typically sets a specific maturity date or a determinable future time for repayment.   If you want to review the wording and next steps for your situation, call (705) 664-0334 to discuss your matter with a paralegal at Bulat Paralegal Service.

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, 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 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.