Yes No Share to Facebook
Promissory Notes: Negotiable Instruments Containing Express Terms Regarding Repayment
Question: What distinguishes a demand note from a common promissory note?
Answer: A demand note differs from a regular promissory note by lacking a fixed repayment date; instead, it becomes payable upon the lender's request. Governed by the Bills of Exchange Act, R.S.C. 1985, c. B-4, these notes still establish a binding promise to pay a specified amount. Seek trustworthy legal guidance like Theresa Forrest's services in London and beyond to ensure clarity and protection in all financial agreements.
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, 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, 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
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 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.