MARGINAL NOTES should be distinguished from MARGINAL CREDITS (q.v.). They are used under such circumstances as the following: F. & Co., a London firm of exporters for instance, having exported goods to India, may desire to sell or discount the bills of exchange they have drawn upon the consignees in India against the consignments. For this purpose they attach the bills of lading to the bills of exchange as a security, and offer the documents to their London bankers. But the latter are not accustomed to always advance in cash the whole of the price of the bills of exchange. Accordingly they will only pay to F. & Co. a part of that price, say 70 per cent. or upwards in cash, and for the rest of the price will give what mercantile men as " marginal notes." The marginal notes given by different bankers are not always exactly identical in form, though they are substantially to the same effect. They are not meant to be transferable, but, as will be seen presently, they are in practice negotiated as securities. In some cases the words " not transferable" are written across the face of the document. The general effect of the notes is merely that the bankers giving them have contracted to hold the residue of the price of the bills of exchange on deposit, bearing interest, by way of security for the payment of the bills, and that the amount so deposited is not to be paid to F. & Co. until advice has been received of the due payment of the and is then to be subject to any other claims which the bankers might have against F. & Co. In Jeffries v. Agra and Magerman's Bank, Vice-Chancellor Wood thus described the legal effect of marginal notes : " These documents, in truth, represent a debt due from the bank, with an engagement to pay that debt to the person to whom they give the receipt note upon a certain condition and at a certain time, as far as that time is defined by the condition, namely, whenever they receive intelligence that the bills, in respect of the discount of which they reserved this right of retainer, have been duly paid and satisfied.
It is, in other words, a debt which will accrue from the bank on that event happening." The last part of this description has great importance from the point of view of the bankruptcy law—an importance emphasised in the decision in ex parte Kenap, in re Fastnedge. In that case the marginal note was in the following form :— Fastnedge & Co., the holders of this marginal note, requiring accommoda. tion had indorsed it over to a creditor and deposited it as a security for the 'debt Subsequently Fastnedge & Co. became bankrupt, the bills of exchange in respect of which the marginal note had been issued were duly honoured, and the bankers were willing to pay the money represented by the marginal note to whoever was legally entitled to receive it. At the time of the bankruptcy the bankers had not received notice of the negotiation of the marginal note. The trustee in bankruptcy thereupon clanned the sum represented by the marginal note as having been within the ORDEIt AND DISPOSITION (q.v.) of Messrs. Fastnedge & Co. at the commencement of the bankruptcy. He failed in this claim, however, on the ground that monies payable under a marginal note are only contingent claims which may or may not end in becoming debts. Wherefore "an instrument of this description, although not negotiable, may be pledged or mortgaged so as to confer on the transferee the rights of an assignee of CHOSE IN ACTION (q.v.), and the title of such transferee will in England prevail over the subsequent title of the transferees trustee in bankruptcy, notwithstanding notice of the transfer has not been given to the discounting banker."