While a pinky promise might carry a lot of emotional weight on a playground or between friends, it usually doesn’t stand up in court. For a promise to become a legally binding contract in Ontario, several essential elements must be present, including an offer, acceptance, consideration, and an intention to create legal relations.
What Makes a Legally Binding Contract?
A contract is defined as an agreement between two or more parties that is enforceable by law, requiring a proposal demonstrating intent to enter into a contract (offer), an act showing willingness to be bound by the offer’s terms (acceptance), and the exchange of something of value (consideration). Without these elements, a promise is not enough to hold someone legally accountable.
Informal promises, such as “pinky promises,” are generally not considered legally binding contracts because they typically lack the crucial intent to create legal obligations enforceable by law, often being social rather than legal agreements. However, by the same logic, a verbal agreement can be a binding contract if it has the requisite legal elements – just because it is not in writing does not mean you may not be liable for what you promised to do or pay!
Therefore, to ensure everyone is on the same page when there is money being loaned, instead of using a pinky promise, a promissory note is a legally binding document that promises to repay borrowed money. It can be used for student loans, personal loans between family and friends, car loans, and even at times, mortgages or business loans.
What Should a Promissory Note Include?
- Date of execution
- Full name of borrower and lender and their signatures
- The loan amount
- The purpose of the loan
- The interest rate of the loan, if applicable
- The amount and frequency of payments
- When payments are due
- Whether the borrower has a co-signor or guarantor (and if so, their details)
Including these terms helps avoid misunderstandings and provides both parties with a clear roadmap for repayment. It also strengthens the note’s enforceability if a dispute arises.
Bottom Line: Put It in Writing
Whether you’re lending $100 or $10,000, putting the terms in writing isn’t about mistrust, but rather, it’s about clarity. Even the best intentions can be forgotten or misunderstood over time. A written agreement, even a simple one, shows that both parties took the arrangement seriously and intended it to have legal consequences.
So, while pinky promises might have their place in childhood, adults dealing with real money (and real risk) should reach for a pen and paper instead.
This blog post was written Carly Baldachin, Summer Student, and Maggie Casey, a member of our Commercial Litigation team. Maggie can be reached at 613-369-0362 or at magdalena.casey@mannlawyers.com.
