Law for Business, 15e by Ashcroft Chapter 22: Promissory Notes and Drafts Law for Business, 15e, by Ashcroft, © 2005 West Legal Studies in Business, a Division of Thomson Learning 1 1 1 1

Chapter 22 Objectives State the accountability of the maker and distinguish among the different types of notes. Identify two different kinds of drafts. Explain how drafts are accepted and what admissions are made by acceptance. Describe characteristics of a check.

Promissory Notes The original parties to a promissory note and the maker and the payee The maker: Expressly agrees to pay according to terms. Warrants that payee is competent to transfer the instrument by indorsement. Admits the existence of the payee.

Types of Notes Bonds Real estate Collateral mortgage notes notes Coupon Registered Collateral notes Real estate mortgage notes Debentures and certificates of deposit

Example of Note PROMISSORY NOTE (can be time note, demand note, collateral note, or mortgage note) March 20, 20xx I, Maker, promise to pay Payee the sum of $3000 due and payable in 30 days at the rate of 8% per annum. Interest and principal are to be payable in legal U.S. tender. ________________ Signature of Maker

Drafts Two types of drafts are time drafts and sight drafts A trade acceptance is considered a draft An instrument should be presented for payment

Checks Certified checks Bank drafts Cashier’s checks Voucher checks Traveler’s checks

Example of Check Drawer Payee Pay to the order of: Dollars No. 533 Drawer 5409 Billionbux Avenue Pittsburg, PA 20 Payee Pay to the order of: Dollars Drawee National Bank Dallas, TX Drawer Signature For

Duties of the Bank Must maintain secrecy regarding information about customers. Must compare the signature on depositors’ checks with that of the signature card.

Duties of the Bank Must pay on demand a depositor’s check to the extend of depositor’s funds on account. Must stop the payment of checks upon request of the drawer.

The End ! Any questions?