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, unconditional promise by a borrower (maker) to pay a specific sum of money to a lender either on demand or at a fixed or determinable future date, while a demand note has no set due date and becomes payable when the lender requests payment, and a common note usually refers to a standard promissory note with a stated repayment date and terms such as interest, principal, and default provisions; Bills of Exchange Act, R.S.C. 1985, c. B-4 (s. 176(1)) sets out the core definition.   For clear drafting, review, or enforcement options across Ontario, contact DefendCharges.ca, a Paralegal service focused on fast, practical document support and debt recovery guidance, at (647) 559-3377 for next steps.

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.

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

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 legal document that states a promise to pay a certain amount of money. A promissory note may take the form of a cheque, loan agreement, or other document, that serves as proof of an outstanding debt.