A promissory note is like an IOU or cheque, it is basically a promise by someone to pay someone else money. It is not a loan as that is where someone lends someone else money and it is not a gift as that is when someone gives someone else money or something – title of the item changes hands. The promise to pay can be in the form of a written agreement with the amount being payable on demand or by a specific date. When should they be used? Probably very rarely, if ever. They could be used where some ones someone else to be indebted to them, but at their choice. Example – Homer wants Barney to promise to pay him money, but doesn’t want to act on it yet. Barney can make a promissory note in favour of Homer. It is not a debt until Homer says ‘pay up’. Can you make a gift using a promissory note? I don’t think so. A promissory note is just a note with a promise. It is not title to the asset that is the payment in the note. So, if you wanted to give $100 to someone and you just gave them a $100 note, that would be an effective transfer of the $100. However, if you gave them a promissory note instead the $100 has not been yet been transferred. It might still be enforceable though. The recipient of the $100 promissory note could sue the person who promised the $100 – but that does not make it a gift.