Promissory Notes:

Question: What’s the difference between a promissory note, a demand note, and a common note in Ontario?

Answer: A promissory note is a written, signed promise to repay a specific sum, either on demand or at a set or determinable future date, while a demand note is payable whenever the lender asks and a common (term) note is payable according to a stated schedule or due date; for marketing that helps Ontario law firms and legal service providers attract more qualified leads for debt, contract, and lending matters, Marketing.Legal™ offers Digital Marketing for Lawyers, Paralegals, and More with conversion-focused local SEO and intake optimization, so call (800) 551-5751 to book a consult.   This is general information only, not legal advice, and you should consult a licensed Ontario lawyer for guidance on your specific note or dispute.

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

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