Unit 13 Flashcards
Means of payment
trade security
document that incorporates a right, in case of a mean of payment it is a credit claim (to claim a sum of money)
Bill of exchange:
A trade security where the drawer orders the drawee to pay a specified sum to the holder at a designated place and time.
Bill of exchange is a trade security which may be used as:
-means of payment in a more complete way
-get financing
The Drawer:BOE
The issuer of the bill, guaranteeing payment to any subsequent holder. The holder can demand payment from the drawer.
The Drawee:BOE
The person who receives the order to pay and must be presented the bill of exchange for payment. The drawee is not automatically obliged to pay upon receiving the order; acceptance is a separate step.
If the drawee accepts the bill by signing it, they become the acceptor and are then obligated to pay.
The Holder: BOE
The person to whom the payment of the bill of exchange must be made.
The drawer may issue the order to be paid to himself (“to one’s own order”), making the drawer and holder the same person.
The drawer and holder don’t have to be the same; the drawer can give the bill to someone else, and that person becomes the holder.
Endorsement BOE
the holder may transfer the bill of exchange and, therefore, the incorporated right: it is the so-called endorsement.
Content requirements BOE
> Name: Must include the term “bill of exchange.”
Unconditional Order: Clear and unconditional order to pay a specified sum.
Drawee’s Name: Identify the person responsible for payment (drawee).
Holder’s Name: Designate the person to receive payment (holder).
Drawer’s Signature: Signature of the person issuing the bill (drawer).
Date of Issuance: Include the date when the bill of exchange is issued.
Direct exchange action
> Purpose: When the acceptor or guarantors fail, the drawee is directly obliged to pay.
Recourse: Direct legal action in Courts through trade security collection proceedings.
Guarantor Option: A third-party guarantee, fulfilling the obligation if the primary party fails.
Exchange Action of reimbursement
initiation: Holder can bring action for non-acceptance or non-payment against obligated parties.
Requirement: Proof of non-acceptance or non-payment at the bill of exchange maturity date.
Evidence: Notarization protest serves as evidence, notifying drawee pending acceptance or payment.
Procedure: If still unresolved, the protest concludes, and the holder notifies payment default to obligated parties.
Promissory note
Payment order with certain amount of money, at a certain place on a certain date
The check
The check contains a payment order, in thise case it will be adressed to a bank (which has the condition of drawee). It will be with the bank with whom the drawer (issuer) will have a check agreement
The banks condition as a drawee:(CHECK)
The bank is not an acceptor and therefore not obliged to accept it.
Payment of Check
- The bank is only obliged to pay the check upon receipt to the extent that the drawer has sufficient funds
- if the bank refuses to pay without a cause, even though it has the funds, the drawer may claim liability for damages due to breach of contract (which is a situation that rarely exists).
Content requirements for a check
- The name “check” included in its title
- An unconditional payment order to pay a certain amount
- The name of the financial institution that must pay (the drawee)
- The date of issuance
- The signature of the issuer (the drawer)
- It is optional to include the name of the holder, since if it isn’t included it is a cashier’s check (called a nominative check when the name of the holder is included)
