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