Forms of Promissory Notes

by Billie Nordmeyer ; Updated July 27, 2017

A promissory note is a legal instrument that ascertains the rights and duties of a note’s maker – the borrower – and its holder – the payee. The note contains terms and conditions, which include the amount of money the holder loans the maker and the amounts of principal, interest and fees the note’s maker will pay to the holder at an agreed time. A promissory note, which may be secured or unsecured, takes one of two forms: a promissory note made payable on demand and a promissory note made payable after a definite time.

Promissory Note Payable on Demand

A demand promissory note -- a sight note -- does not include a due date. Instead, an agreed amount is payable “on demand” or “on presentation” to the maker by the holder. In this case the maker has no assurance as to when the loan must be repaid. Instead, the holder can request repayment of the promissory note by presenting the note to the maker.

Promissory Note Payable after a Definite Time

A promissory note may be payable after a definite period that is stated in the note or on a specific date. For example, the monetary payments may be due according to a predefined schedule. In this instance, the maker is aware of the exact time at which a lump sum or a series of payments must be made.

Promissory Note Payable after Multiple Time Periods

A promissory note might be payable in multiple parts after more than one definite periods, which are stated in the note. For example, one part of the note might be payable any time “on demand” within three months following the creation of the note, and another part payable between four and six months following the note’s creation. To be a valid contract, the note must have an end date or be payable when the lender demands payment.

Promissory Note Limitation Period

A payable on demand promissory note holder may present the note for payment at any time within a limitation period before it becomes time barred. The limitation period is two years from the note’s date of endorsement. After this time, the Limitations Act bars the creditor’s recovery rights.

About the Author

Billie Nordmeyer works as a consultant advising small businesses and Fortune 500 companies on performance improvement initiatives, as well as SAP software selection and implementation. During her career, she has published business and technology-based articles and texts. Nordmeyer holds a Bachelor of Science in accounting, a Master of Arts in international management and a Master of Business Administration in finance.