Promissory Notes:

Question: When is a demand note due compared to a common promissory note in Canada?

Answer: A promissory note is an unconditional written promise to pay a sum certain, signed by the maker, on demand or at a fixed or determinable future time, under terms like principal and interest; Bills of Exchange Act, R.S.C. 1985, c. B-4, s. 176(1).  A demand note is the same type of negotiable instrument, but it does not list a specific due date, so it becomes payable when the payee requests payment (or otherwise makes a demand consistent with the note’s wording).  If you’re reviewing whether your document is a true demand note or a common note with a stated maturity date, Pollock Paralegal can help you understand the key terms and next steps, call (519) 694-0363.

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, 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

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 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.