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   Chapter 10 PROMISSORY NOTES

Up To Date Business By Various Characters: 4069

Updated: 2017-12-06 00:03


Ordinary form of promissory note.

A promissory note is a written promise to pay a specified sum of money. At the time of the note's issue-that is, when signed and delivered-two parties are connected with it, the maker and the payee. The maker is the person who signs or promises to pay the note; the payee is the person to whom or to whose order the note is made payable. Negotiable in a commercial sense means transferable, and a negotiable note is a note which can be transferred from one person to another. A note to be made negotiable must contain the word bearer or the word order-that is, it must be payable either to bearer, or to the order of the payee. A non-negotiable note is payable to a particular person only. A note may be written on any kind of paper, in ink or pencil. It is wise, however, to use ink to prevent changes. All stationers sell blank forms for notes which are easily filled in.

The samples of notes which appear in this lesson are selected simply to illustrate to students the fact that there are a great many special forms of notes in common use. The wording differs slightly in different States.

The date of a note is a matter of the first importance. Some bankers and business men consider it better to draw notes payable at a certain fixed time, as, "I promise to pay on the 10th of March, 1897." The common custom is to make notes payable a certain number of days or months after date. A note made or issued on Sunday is void. The day of maturity is the day upon which a note becomes legally due. In several of the States a note is not legally due until three days, called days of grace, after the expiration of the time specified in the note.

A promissory note filled out on an engraved blank.

The words value received, which usually appear upon notes, are not necessary legally. Thousands of good notes made without any value consideration are handled daily.

The promise to pay of a negotiable note must be unconditional. It cannot be made to depend upon any contingency whatever

.

Notes that are made in settlement of genuine business transactions come under the head of regular, legitimate business paper. An accommodation note is one which is signed, or indorsed, simply as an accommodation, and not in settlement of an account or in payment of an indebtedness. With banks accommodation paper has a deservedly hard reputation. However, there are all grades and shades of accommodation paper, though it represents no actual business transaction between the parties to it, and rests upon no other foundation than that of mutual agreement. No contract is good without a consideration, but this is only true between the original parties to a note. The third party or innocent receiver or holder of a note has a good title, and can recover its value, even though it was originally given without a valuable consideration. An innocent holder of a note which had been originally lost or stolen has a good title to it if he received it for value.

A special form for a promissory note.

A note does not draw interest until after maturity, unless the words with interest appear on the face. Notes draw interest after maturity and until paid, at the legal rate.

A note should be presented for payment upon the exact day of maturity. Notes made payable at a bank, or at any other place, must be presented for payment at the place named. When no place is specified the note is payable at the maker's place of business or at his residence.

In finding the date of maturity it is important to remember that when a note is drawn days after date the actual days must be counted, and when drawn months after date the time is reckoned by months.

To discount a note is to sell it at a discount. The rates of discount vary according to the security offered, or the character of the loan, or the state of the money market. For ordinary commercial paper the rates run from four to eight per cent. Notes received and given by commercial houses and discounted by banks are not usually for a longer period than four months.

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