1. 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

2. 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.

3. 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.

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

5. 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

6. 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

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

8. 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

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

10. 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.

11. The End !
Any questions?