Promissory Notes: Negotiable Instruments Containing Express Terms Regarding Repayment | Defend-it Legal Services
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Promissory Notes: Negotiable Instruments Containing Express Terms Regarding Repayment


Question: What is the difference between a promissory note and a demand note?

Answer: A promissory note is a financial document where one party agrees to pay a specific sum to another at a set time or upon demand. Part of Bills of Exchange Act, R.S.C. 1985, c. B-4, it may include interest terms and repayment conditions. A demand note is a subtype where the repayment date is not fixed, becoming due upon lender request. Whether securing a personal agreement or a bank transaction, understanding these instruments aids in managing financial obligations effectively. For tailored guidance on promissory notes, contact Defend-it Legal Services to explore your options.


Understanding What Constitutes As a Promissory Note and What Is Meant By a Demand Note Versus a Common Note

Promissory Notes: Negotiable Instruments Containing Express Terms Regarding Repayment 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:


176 (1) A promissory note is an unconditional promise in writing made by one person to another person, signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified person or to bearer.

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

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 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.

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