Promissory Notes:

Question:Do demand notes count as promissory notes under Ontario law, and what does “payable on demand” mean for repayment?

Answer:In Ontario, a demand note is a type of promissory note where the issuer makes an unconditional promise in writing to pay a sum certain, but it becomes due immediately when payment is demanded (there is no fixed due date). Under the Bills of Exchange Act, R.S.C. 1985, c. B-4, section 176(1), a promissory note is defined as an unconditional written promise to pay on demand or at a fixed or determinable future time. The practical impact is that the lender can require payment once they make a proper demand, and the note should be reviewed for key terms like principal, interest (if any), parties, and the repayment wording to understand when you are legally required to pay and how the note can be enforced. If you are dealing with a demand note or another debt document in Ontario, Byfield Legal Services can help you understand your obligations and next steps using a paralegal-led, debt-and-document review approach; call (289) 927-7365 for guidance.

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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 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.

Note: Please contact Byfield Legal Services by phone at: (289) 927-7365 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, 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.