Demand Note Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Demand Note, written in plain English, along with examples of how it is used.

What is Demand Note?

n. A promissory note that is payable whenever a request to pay it is made. Demand notes differ from notes that have specific due dates, occurrences that prompt their payment, or have installments.

History and Meaning of Demand Note

A demand note is a type of promissory note that is payable upon demand, meaning that the creditor can request payment at any time. Unlike other types of promissory notes that have specific due dates or trigger events, demand notes have no specific time frame for repayment. The holder of a demand note can demand repayment of the note at any time, as long as they provide notice to the debtor.

The purpose of a demand note is to provide flexibility to both the debtor and creditor. The debtor can avoid the pressure of a set schedule and the risk of default if they are unable to repay the note on time. Also, the creditor can use the note as a short-term investment and can request repayment when they need funds.

Examples of Demand Note

  1. A business owner takes out a demand note from a lender to pay for unexpected expenses. The lender can request repayment at any time, but the business owner can pay the note back on their own terms.

  2. An individual borrows money from a friend for a down payment on a house. They both agree to a demand note, so the friend can request repayment once the borrower sells their prior home.

  3. A startup company borrows funds from an investor using a demand note. The investor can request repayment when the company receives funding or when they reach certain milestones.

Legal Terms Similar to Demand Note

  1. Promissory Note: A legal instrument that obligates a borrower to repay a loan to a lender, either on a specific date or upon request.

  2. Due Date: A specific date on which a loan or other financial obligation must be repaid.

  3. Acceleration Clause: A provision in a loan agreement that allows the lender to demand full repayment of the loan if the borrower fails to meet certain conditions or pay on time.