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Terms and Datings

The document discusses terms related to credit transactions such as credit terms, dating, credit instruments, and factors in fixing credit terms. It defines terms like terms of sale, dating, and discusses different types of credit instruments like promissory notes, checks, drafts, and acceptances. It also covers commercial credit instruments and lists characteristics and classification of credit instruments.

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Mariesz Pleyto
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35 views1 page

Terms and Datings

The document discusses terms related to credit transactions such as credit terms, dating, credit instruments, and factors in fixing credit terms. It defines terms like terms of sale, dating, and discusses different types of credit instruments like promissory notes, checks, drafts, and acceptances. It also covers commercial credit instruments and lists characteristics and classification of credit instruments.

Uploaded by

Mariesz Pleyto
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Terms and Datings - gives property rights to a creditor chargeable against the

debtor, embodying all conditions to be mutually agreed upon


Objectives: by both parties
Know and explain the meaning of terms in credit and the lack Characteristics of Credit Instruments
of uniformity in credit terms
1) Presence of risk involved since payment is deferred to
List and understand the several factors in fixing terms a later date
Explain and note other terms governing trade transactions 2) The debtor-creditor relationship is stressed
Terms of Sale Classification of Credit Instruments
- the time element which involves the determination as to 1) Acceptability – instrument can be limited (based on
when payment shall be made the credit standing of the issuer) or unlimited
- measures or specifies the credit period (possess the characteristics of money)

Dating 2) Form – could be orders or promises to pay

- a modification of the usual terms by which the time of 3) Function – credit money, commercial credit and
payment is extended on account of certain circumstances or investment credit instruments
contingencies 4) Negotiability – that quality whereby a bill, note or
Lack of Uniformity in Terms check, passes freely from hand to hand like currency

1) Business practice – credit terms vary and modified Commercial Credit Instruments
depending on the one granting the credit 1) Promises to Pay
2) Business trade and volume – business houses a) Open book account – constitutes implied verbal
sometimes differ in the terms granted to promise of the debtor when he buys consumable
customers and at times to the same customer goods on credit.
Factors in Fixing Terms b) Promissory Note – unconditional written promise
1) Nature and Use of the Commodity – perishable of the maker to pay a certain sum of money to the
products are sold on cash basis or close to cash terms bearer on order or demand at a future determinable
while luxury and non-essential items are often sold time
on an installment basis c) Collateral Promissory Note – same as a promissory
2) Geographic Considerations – seller recognizes the note but the collateral is indicated on the surface or on a
distant location of the buyer separate documents

3) Seasonal Dating – order for products of seasonal d) Commercial Letters of Credit – written promise on
nature are placed in advance for later delivery to the part of the bank to honor drafts drawn against it.
coincide with demand for such goods Used in financing foreign trade

4) Terms in Retail Trade – given to clients because of 2) Orders to Pay


their patronage a) Checks – an order of a depositor to his bank to pay
5) Standing of the Customer – character and payment a certain amount of money to a third person or
history of the customer himself on demand. Types of checks: PERSONAL,
CASHIER’S OR MANAGER’S CHECK, CERTIFIED CHECK
6) Cash Terms – utilized to protect the seller from credit and TRAVELER’S
risk as the practice is often cash on delivery (C.O.D) or
cash before delivery (C.B.D) b) Drafts – orders to pay and are also drawn against a
drawee to pay a third person in money on demand at a
Credit Transaction Documents future determinable time. Types of Drafts: MONEY
ORDER, BANK DRAFT, TRADE or COMMERCIAL DRAFT and
Credit Instruments SIGHT or DEMAND DRAFT
- a document that gives evidence of a credit obligation c) Acceptance – an instrument presented to the
resulting from a past transaction which sets forth the drawee for acceptance and drawee assumes the burden
responsibility of the debtor to his creditor. (Miranda) of payment Type of acceptance: TRADE and BANKER’S
- an agreement to settle an obligation

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