Promissory Notes

SMALL CLAIMS COURT: PROMISSORY NOTE

Some explanations about Promissory Note claims in Small Claims Court

Promissory note: Actually, a promissory note is a contract specifying the terms of a promise by one party called the maker, to pay a sum of money to the other party, called the payee. Promissory note is intended to be a legal contractual obligation obligating the borrower to pay back a loan. Promissory note is some sort of security that can somehow ensure the person to whom it was issued, that payment in the same amount shall be paid at a definite period of time in the future. Whereas a promissory note is evidence of a loan, it is not the loan contract, which would contain all the terms and conditions of the loan agreement

Generally, a promissory note includes the following:

  • the principal amount
  • the interest rate (if any)
  • the date
  • the names of the parties
  • the term of repayment (it can be for a specified fixed length of time or payable “on demand” whenever the lender demands repayment of the amount loaned to the borrower)
  • any terms regarding the right to pre-pay the loan before the maturity date
  • what happens if the borrower misses a payment or fails to pay when payment is demanded

Secured Promissory Note usually includes a clause that states that the borrower may pay back the loan before the required date. Attached to the secured promissory note is the security agreement, which specifies the collateral that the borrower is offering.

Unsecured Promissory Note doesn’t have the security agreement, and are more frequently seen between relatives or friends.

Suppose you want to borrow $10,000 from your rich Uncle John. After the dust settled down, he agrees to borrow you the money. But before any exchange can take place, your uncle wants the specific repayment terms in writing and signed by both parties. This document would be considered a promissory note and is legally binding. Once you and your rich Uncle John signed a promissory note, the precise terms of that note are the ones which will be enforced during any future legal proceedings. No matter where you go or what you do with the money, Uncle John can always prove the existence of the original loan. But there is always a “but”. If you can prove that you signed the promissory note under extreme pressure from your Uncle John (he put a gun to your head), then a judge may rule the promissory note unenforceable.

Promissory Note Proceedings in Small Claims Court

Often, having a promissory note and collecting money on that promissory note are two different things. You might want to file a claim for Promissory Note matters in small claims court if the amount of money you request is not more than $25,000. The number of steps in a Small Claims Court proceedings varies from case to case.

Time Limits: There may be a time limit on how long you can wait before making a claim in Small Claims Court, which is set out in the Limitations Act. Under the law, the time you have to sue may run out. The deadlines vary depending on the circumstances of the case, and the type of case or claim. Check the time limits for your type of case. If you aren’t sure about whether you are still in time to make a claim, talk to CP Paralegal Services.

The following steps will have to be taken for your Promissory Note case in Small Claims Court:

  • Completing the Plaintiff’s Claim form: you will be required to write in the plaintiff’s claim form a short, clear summary of the events that took place and the reasons you think you are entitled to judgment against the defendant.
  • Deciding which Small Claims Court office to go to
  • Preparing all documents and evidences that can support your case
  • Filing the claim
  • Paying Small Claims Court fees
  • Serving the Plaintiff’s Claim after you have filed the claim with the court: you must prove that the defendant was properly served with the claim. You do this by filing an Affidavit of Service form.

If you have filed a claim and the defendant has not filed a Defence within 20 days, you can ask the court clerk to note the defendant in default. You do this by filing a Request to Clerk form. When a defendant has been noted in default you can ask the court to order them to pay money to you. This can be done by:

  • Asking the court clerk to sign default judgment for a specified sum of money for that you must fill out and file a Default Judgment form; or
  • Asking a judge to order default judgment. To do this, you file a Notice of Motion and Supporting Affidavit form. Explain the facts supporting your motion.

If it is a defended small court procedure, both parties should go for a settlement conference – a meeting with the parties and a judge to try to find an answer to the case that all parties can agree to. It must be held no later than 90 days after the first Defence is filed. There is a special rule for claims that are less than $2,500. The parties can agree to have a judge decide the case at the settlement conference. To agree to this, the parties must fill out a Consent form. The judge would decide the case at the settlement conference only if the parties could not reach a settlement. If the judge decides the case at the settlement conference, the case ends and there is no trial. At the trial each party tells their side of the story and the judge makes a decision.

What You Need to Consider BEFORE making Promissory Note claim in Small Claims Court:

  • Ask yourself if a lawsuit that you are going to start will be worth it.
  • You will need the correct legal name of the person or business and a current residential or business address.
  • Information you need to have to support your Small Claims Court case: You will have to prove your case. Any written evidence, documents, photographs and other that you intend to use to support your claim must be attached to the Plaintiff’s Claim form.
  • Time you have to spend: Can you take days off at work to file your claim, deliver documents, and attend in court for a trial? Are you willing to spend hours and hours for: 1) researching all guides on filing your claim; 2) researching all applicable Small Claims Court procedures and steps; 3) visiting Law Help Ontario at Small Claims Court – Pro Bono Law Ontario Duty Counsel are free lawyers that offer limited services to the public at the Toronto Small Claims Court; or 4) reading legislation on-line, for example the Limitations Act?
  • Consider other options to resolve the issue: To keep your costs low, you might want to try to reach an agreement out of court. This is called settlement. You may consider mediation, which is a less formal method of resolving a dispute through a neutral third party. Mediation can be less time-consuming, more flexible, and less expensive than proceeding in court. It can also help you find your own solution to the dispute and preserve your relationship with the person/business. CP Paralegal Services is always ready to provide you with mediation services.
  • Consider having help from CP Paralegal Services: keep in mind, court staff cannot provide you with legal advice or help you to complete all necessary forms. Do not relay on information from relatives and friends, unless they are lawyers or paralegals.

How CP Paralegal Services Can Help You with Promissory Note Case in Small Claims Court

The list of reasons to make a claim for Promissory Note in Small Claims Court can be endless. Although, you do not need a lawyer or paralegal when you go to Small Claims Court, to have a knowledgeable and experienced party to defend your case is a good idea. Remember, CP Paralegal Services is always ready to help you with your Promissory Note matter. We think that the information above that we have gathered especially for you, has assured you that dealing with Small Claims Court claim is complicated and often is overwhelming even for professionals.

There are 5 reasons why you may consider asking CP Paralegal Services for assistance:

  1. At CP Paralegal Services, we have experience and knowledge; we know how to deal with your Promissory Note case in Small Claims Court.
  2. If you hire CP Paralegal Services to represent you in Small Claims Court for your Promissory Note case, we’ll go to the court office as many times as it necessary, we’ll come to the trial instead of you, and you will not be involved in a stressful process.
  3. You will not have to ask for a day off at work for filing and serving documents or attend the trial.
  4. CP Paralegal Services will develop the best possible strategy of your defence.
  5. We make sure that all evidences are well-organized for your Promissory Note case and all time limits are considered.

Do not make a mistake! Save your time, money and nerves!

Let CP Paralegal Services do their job while you are doing yours!

Do not forget that the other party is able to respond to your claim and may give evidence that will affect the judge’s view of your Promissory Note case. The particular details and proceedings for a Promissory Note are very technical, tricky and complicated and, more likely, you will need professional assistance.