Promissory Notes:

Question: What’s the difference between a promissory note and a demand note in Ontario, and can a paralegal at KLP Paralegal Services help me understand the wording before I sign or respond?

Answer: A promissory note is an unconditional written promise to pay a specific sum of money at a fixed or determinable future time or on demand, and it should clearly set out key terms like the parties, principal amount, interest (if any), and repayment timing, as defined in Bills of Exchange Act, R.S.C. 1985, c. B-4. A demand note is a type of promissory note that has no fixed due date and instead becomes payable when the lender/payee requests payment, so you may need to act more quickly if you receive a demand or payment request. KLP Paralegal Services can review the exact language in your document, help you spot issues like missing dates, unclear interest terms, or potential notice problems, and guide you on practical next steps for your situation in Ontario, so you understand what you’re agreeing to before you sign or respond, call (416) 570-6378 to get started.

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, 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.  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

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 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.