Overview

Question 1

Two basic instruments of commercial paper

Answer 1

• note (e.g. promissory note)

- draft (e.g. a check)

Question 2

Note

Answer 2

promise to pay

parties: person promising to pay (“maker”) and the person to whom payment is promised (“payee”)

E.g.: Certificate of Deposit: like a note. an instrument made by a bank containing (i) acknowledgment of money received and (ii) promise to repay

Question 3

Draft

Answer 3

order to pay

parties: one party (“drawer”) orders another party (“drawee”, often a bank) to pay money to a third party (“payee”)

E.g.: check: any draft drawn on a bank and payable on demand