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Promissory Note With A Memorandum That It Is To Be Used As Collateral Security |
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This section is from the book "Canadian Banking Practice", by John T. P. Knight.
This section is from the "" book, by .
Question 9. - A promissory note bears (1) on one corner the words "To be used as collateral security."
(2) In the body the words "To cover 50 per cent. of my subscribed stock in the above company."
Do either of these affect the negotiability of the note?
Answer. - If the words "to be used as collateral security" formed part of the note at the time it was issued, the note is invalid. An instrument which bears a statement by the maker that it is to be held as collateral is not a note. See Falcon-bridge, 2nd ed., 783.
The words "to cover 50 per cent, of my subscribed stock in the above company" do not affect the negotiability of the note.
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