Legal Definitions - payable on demand

Payable on Demand describes a debt or financial obligation that must be paid whenever the person entitled to receive the payment (known as the "holder") requests it. Unlike a debt with a fixed maturity date, a debt that is payable on demand does not have a predetermined future payment deadline. Instead, it becomes due and payable as soon as the holder asks for the money, or very shortly thereafter, depending on the specific legal jurisdiction. This arrangement grants the holder immediate control over when the payment is due.

Here are some examples illustrating how "payable on demand" applies:

• Example 1: Personal Loan Agreement

  Imagine a scenario where Maria lends $10,000 to her friend, David, to help him start a small business. They write up a simple agreement stating that the loan is "payable on demand." This means that Maria can ask David to repay the $10,000 at any time, and David is legally obligated to do so promptly, without a specific future date having been set for repayment.

  How it illustrates the term: The loan is due whenever Maria, as the holder, demands payment, rather than on a pre-scheduled date.

• Example 2: Business Line of Credit

  A small manufacturing company, "InnovateTech," secures a flexible line of credit from a private investor to manage fluctuating inventory costs. The loan agreement specifies that the outstanding balance on the line of credit is "payable on demand." This allows the investor to request full repayment of any drawn funds at any point, providing them with the flexibility to retrieve their capital without waiting for a fixed loan term to expire.

  How it illustrates the term: The investor can "call" the loan and demand repayment of the principal at their discretion, making InnovateTech responsible for immediate repayment.

• Example 3: Formal Promissory Note

  An individual invests in a growing tech startup by purchasing a promissory note. The note explicitly states, "The principal sum of this note is payable on demand by the holder." This clause means the investor, who holds the note, does not have to wait for a specific maturity date for the note to become due. They can present the note to the startup and demand repayment of the principal amount at any time, and the startup is legally bound to fulfill that request.

  How it illustrates the term: The startup's obligation to pay is triggered by the investor's request, not by a predetermined calendar date, giving the investor control over the repayment timing.