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Promissory Notes:
Negotiable Instruments Containing Express Terms Regarding Repayment
Last Updated: June 17 2025
Question: What distinguishes a demand note from a common promissory note in Canada?
Answer: A demand note is a form of promissory note defined under the Bills of Exchange Act, R.S.C. 1985, c. B-4, which is payable upon the lender's request without a fixed repayment date, unlike a common promissory note which specifies when the payment is due. Understanding the nuances between these notes can safeguard your financial interests. Connect with Empowered Legal Services to learn more about protecting your rights.
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.
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:
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 negotiable instrument and could consist as a cheque, loan agreement, or other document evidencing indebtedness.
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