Duhaime's Law Dictionary


Collateral Definition:

Property which has been committed to guarantee a loan.

Related Terms: Security

In a case which involved a local chattel mortgage statute, Dewar v Bank of Montreal, Justice McKinnon of the British Columbia Supreme Court wrote:

"The word collateral ... relates to any security other than the personal covenant to pay whether it be considered primary or secondary security."

In Royal Bank of Canada v Slack, Justice Schroeder of the Ontario Court of Appeal:

"Collateral means literally situated at the side, hence parallel or additional, and not, if the transaction does not require it, secondary. Collateral security is any property which is assigned or pledged to secure the performance of an obligation and as additional thereto, and which upon the performance of the obligation is to be surrendered or discharged."

In Benning v Thibaudeau, Justice Fournier of the Supreme Court of Canada used these words:

"The literal meaning of collateral is additional or parallel; it does not mean ancillary or secondary unless shown by other circumstances. "

While usually used in the context of security, the term collateral is also used in reference to negligence (as in collateral negligence) and in the law of evidence, as a character witness, a collateral presented by an individual.

REFERENCES:

  • Benning v. Thibaudeau, 20 S.C.R. 110 (1891)
  • Dewar v Bank of Montreal, 50 BCLR 273 (1983)
  • In re Athill, 16 Ch. D. 211
  • Royal Bank v Slack, 11 D.L.R. (2d) 737 (1958)

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