Legal Definitions - demand instrument

A demand instrument is a written financial document that requires payment immediately upon the holder's request. Unlike documents that specify a future payment date, a demand instrument is payable "on demand," "at sight," or "on presentation," meaning the person holding it can ask for payment at any time, and the issuer is obligated to pay without delay.

Here are some examples to illustrate this concept:

• Personal Check: When you write a personal check to pay for groceries, the grocery store can deposit or cash that check immediately. The check does not specify a future date for payment; it is payable "on demand" as soon as it is presented to your bank.

  How it illustrates the term: The payee (the grocery store) can demand payment at any time by presenting the check, and the bank is expected to honor it immediately if funds are available.

• Promissory Note for a Flexible Loan: Imagine a scenario where a parent lends their child $10,000, and they create a promissory note stating that the child will repay the loan "on demand" from the parent. There is no fixed repayment schedule or end date.

  How it illustrates the term: The parent can ask for the money back at any point, and the child is legally obligated to repay the full amount immediately upon that demand, rather than on a pre-set schedule or a specific future date.

• Cashier's Check: A small business receives a cashier's check from a client as payment for services rendered. The business owner takes the cashier's check to their bank.

  How it illustrates the term: The bank will process the cashier's check for immediate payment upon presentation. A cashier's check is guaranteed by the issuing bank and is designed to be paid "at sight" without any waiting period or future maturity date.