CHAPTER LIII.

PROMISSORY NOTES.

Prior to the Statute 3 and 4 Anne, c. 9., it was the opinion of Lord Holt and the majority of the judges that no action could be maintained, even by the payee, on a promissory note as an instrument, but that it was only evidence of a debt. The statute, however, made promissory notes "assignable and indorsable over in the same manner as inland bills of exchange are or may be, according to the custom of merchants." Cf. Chapter XXXI., supra, p. 336.

While a promissory note continues in its original shape of a promise by one man to pay to another, it bears no similitude to a bill of exchange. When it is endorsed, the resemblance begins; for then it is an order by the endorser upon the maker of the note (his debtor by the note), to pay to the endorsee. (Heylyn v. Adamson, 1758, 2 Burr. at p. 676, 4 R.C. at p. 452.)

Secs. 176 to 187, under the heading "Promissory Notes," compose Part IV. of the Act.

It is enacted by sec. 186 that, except as in that section pro- Provisions as to bills, how vided, and subject to the provisions of this Part, the provisions far appliof the Act relating to bills of exchange apply, with the necessary cable to modifications, to promissory notes, and that in the application notes. of such provisions the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first endorser of a note shall be deemed to correspond with the drawer of an accepted bill payable to drawer's order.

Generally speaking, the provisions of the Act relating to a bill of exchange as an order to pay are inapplicable to a promissory note which is a promise to pay, although, as will be noted under sec. 176, many of the other elements of a bill as defined by sec. 17 equally belong to a note.

Sec. 186 expressly provides that the provisions of the Act as to bills relating to presentment for acceptance, acceptance, acceptance supra protest, and bills in a set, do not apply to notes.

Other sections of Part IV. by enacting special rules for notes, impliedly make inapplicable to notes some of the earlier provisions of the Act relating to bills. See notes to secs. 180 and

[Sec. 176.

Provisions as to bills,

how far applicable to notes.

181 as to time of presentment for payment of a note payable on demand, sec. 182 as to when a demand note is deemed to be overdue, secs. 183 and 184 as to the place of and necessity for presentment for payment and sec. 187 as to protest.

The contract entered into by the maker of a note is embodied in sec. 185.

A note may be made by two or more makers, and they may be liable thereon jointly, or jointly and severally, according to its tenor (sec. 179).

A bank note is a promissory note made by a bank payable to bearer on demand: see Chapter XIV., supra, p. 114.

As to Dominion notes, see Chapter XXIX., supra, p. 314. See also sec. 9 of the Bills of Exchange Act as to the English Acts, 15 Geo. 3, c. 51, and 17 Geo. 3, c. 30, which have never been expressly repealed in Canada.

PART IV.

PROMISSORY NOTES.

Definition.

176. A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person, or to bearer.

Endorsed by 2. An instrument in the form of a note payable to the maker's order is not a note within the meaning of this section,

maker.

Pledge.

Invalidity.

unless it is endorsed by the maker.

3. A note is not invalid by reason only that it contains also a pledge of collateral security with authority to sell or dispose thereof. 53 V., c. 33, s. 82. Eng. s. 83.

Unconditional.

See notes to sec. 17 under this head.

A note cannot be made conditionally, but a bill may be ac

cepted conditionally (sec. 38).

Cf. notes to sec. 95 of the Bank Act in regard to deposit receipts, supra, p. 216.

An instrument may be a promissory note although it provides for payment by instalments, the whole to become due on de- Uncondifault in payment of any one instalment, and contains in addition tional. the following clause: "No time given to, or security taken from, or composition or arrangement entered into with, either party hereto shall prejudice the rights of the holder to proceed against any other party." (Kirkwood v. Carroll, [1903] 1 K.B. 531; quare whether the addition to the note is in any proper sense operative.)

The following are valid promissory notes:

Promise to

1. Received from C. £30 payable on demand. (McGubbin v. pay. Stephen, 1856, 18 D. 1824, 28 Jurist (Sc.) 618.)

2. Due A. or bearer $482, payable in 14 days after date. (Gray v. Worden, 1870, 29 U.C.R. 535.

3. An I.O.U. containing a promise to pay, e.g. "I.O.U. £20, to be paid on the 22nd inst.'

W. 74.)

(Brooks v. Elkins, 1836, 2 M. &

4. In Quebec an I.O.U. or bon has been usually considered as a promissory note without additional words importing a promise to pay. See, e.g., Beaudry v. Laflamme, 1862, 6 L.C.J. 307; Désy v. Daly, 1897, Q.R. 12 S.C. 183.

5. Received from A.B. $1,200 for which I am responsible with interest at the rate of 7 p.c. per annum, upon production of this receipt, and after 3 months notice. (La Forest v. Babineau, 1906, 37 S.C.R. 521.)

The following are not promissory notes. 1. I.O.U. £20 for value received.

1 C.B. 543.)

(Gould v. Coombs,

1845,

2. Good to A.B. for $850 on demand. (Palmer v. McLennan, 1873, 22 C.P. 565.)

3. Borrowed of C. £100 to account for on behalf of the D. Club at months notice, if required. (White v. North, 1849, 3 Ex. 689.)

4. A writing merely certifying that a person is indebted to another in a certain sum of money. (Dasylva v. Dufour, 1866, 16 L.C.R. 294.)

5. Received from A.B. loan of $800 to be returned when required. (De Sola v. Ascher, 1889, 17 R.L. 315.)

Not a pro

mise to pay.

Sec. 176. In writing.

See notes to sec. 2, supra, p. 347.

Made by one person to another.

Cf. notes to sec. 17 under the head "addressed by one person to another."

An instrument addressed to A.B. undertaking to pay C.D., although it complies literally with the section, only enures to the benefit of C.D. C.D. cannot sue on it as a promissory note, although it may be evidence of a contract to pay money to C.D. (Trimble v. Miller, 1892, 22 O.R. 500.)

Where in a bill drawer and drawee are the same person, or where the drawee is a fictitious person or a person not having capacity to contract, the holder may treat the instrument, at his option, either as a bill of exchange or a promissory note (sec. 26).

Where an instrument is so ambiguously worded that it is doubtful whether it was intended for a bill or for a note, the holder may treat it at his option as either. (Edis v. Bury, 1827, 6 B. & C. 433; Fielder v. Marshall, 1861, 30 L.J.C.P. 158; Golding v. Waterhouse, 1876, 3 Pugs. (N.B.) 313; Mare v. Charles, 1856, 5 E. & B. at p. 981; Allen v. Mawson, 1814, 4 Camp. 115.) An instrument in the form of a note with a blank left for the payee's name is not a completed note (Reg. v. Cormack, 1891, 21 O.R. 213); but see secs. 31 and 32 as to the right to fill up blanks.

Signed by the maker.

As to signature, see sec. 4 and notes.

As to a simple signature on a blank paper delivered by the signer in order that it may be converted into a note, see sec. 31. As to the contract entered into by the maker, see sec. 185.

On demand.

As to when a note is payable on demand, see sec. 23.

At a fixed or determinable future time.

As to when a note is payable at a determinable future time, see sec. 24. Cf. notes to sec. 17 under this head.

A note must not be expressed to be payable on a contingency (sec. 18).

A sum certain in money.

17).

Cf. notes to sec. 17 under this head.

A promise to pay out of a particular fund, is not a note (sec.

Specified person or bearer.

Cf. notes to sec 17 under this head.

Payable to the maker's order.

The provision of the English Act corresponding to sub-sec. 2 reads "unless and until it is indorsed by the maker."

B. makes a note payable to his own order, and endorses it in blank. This is a valid note payable to bearer. (Hooper v. Williams, 1848, 2 Ex. 13; Masters v. Baretto, 1849, 8 C.B. 433.)

B. makes a note payable to his own order, and endorses it to C. This is a valid note payable to C. or order. (Gay v. Lander, 1848, 17 L.J.C.P. 286.)

Pledge of collateral security.

Prior to the Act it was held that a note with the words "this note to be held as collateral security" upon it was invalid (Hall v. Merrick, 1877, 40 U.C.R. 566 and cases cited; Sutherland v. Patterson, 1884, 4 O.R. 565), but a memorandum that the maker had deposited collateral security with the payee was held not to invalidate an instrument as a note. (Chesney v. St. John, 1879, 4 A.R. at p. 156.)

Sec. 176.

177. A note which is, or on the face of it purports to be, Inland note. both made and payable within Canada, is an inland note.

2. Any other note is a foreign note. 53 V., c. 33, s. 82. Eng. Foreign

s. 83.

note.

Cf. sec. 25 and notes, as to inland and foreign bills. Where a foreign note is dishonoured, protest thereof is unnecessary, except for the preservation of the liabilities of endors ers (sec. 187).

178. A promissory note is inchoate and incomplete until Delivery delivery thereof to the payee or bearer. 53 V., c. 33, s. 83. Eng.