This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 463.— Is the following a legal form of promissory note?
$3,000. Montreal, 31st October, 1899.
On demand for value received, I promise to pay to J. Richardson or order at the Merchants Bank of Canada here, three thousand dollars and interest at the rate of 6 per cent. per annum, having deposited with this obligation as collateral security 5,000 shares Payne Consolidated Mining Co., with authority to sell the same without notice, either at public or private sale, or otherwise, at the option of the holder or holders hereof on the non-performance of this promise, (he or they giving me credit for any balance of the net proceeds of such sale remaining, after paying all sums due from me to the said holders or holder, or to his or their order (and it is further agreed that the holder or holders hereof, may purchase at said sale). (Sgd.) A. McKay.
Answer.—It is of course quite lawful for the parties to make such a contract, but we understand the question is as to whether it is a note to which the Bills of Exchange Act would apply, and on this point we are of the opinion that it is not, for the reason that in addition to the inclusion of " a pledge of collateral security with authority to sell or depose thereof," which are permitted by the Act (section 82, sub-sec. 3), it contains other provisions, notably an assignment of the proceeds as security for other sums due to the holders of the note. There are other conditions in the form which might have the same effect, but the one specially mentioned clearly has.