MAJOR DOCUMENTS USED IN

CREDIT TRANSACTIONS
Presented By :
GESTO, Jean Arvie A.
MONTERO, Sherlyn L.
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 TOPICS 2
Credit Instruments Other Important Documents
Classes and Kinds of Credit Bank Credit
Instrument Letter of Credit
Open Book Account Bill of Lading
The Case of the Trade Acceptance Trust Receipts
The Promissory Note A Warehouse Receipt
Bill of Exchange Obligation to Deliver
a. Foreign Liability for Mis delivery
b. Domestic Warehouse Receipts as Collateral.
Acceptances Mortgage
a. Bank Acceptance Pledge
b. Credit Cards
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CREDIT INSTRUMENTS
- may be described simply as documents which
evidence the existence of credit transactions
-refer to all various kinds of written
instruments that, by and large, are customarily
used to embody the terms of a credit contract

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CREDIT INSTRUMENTS
- may be described simply as documents which
evidence the existence of credit transactions
-refer to all various kinds of written
instruments that, by and large, are customarily
used to embody the terms of a credit contract

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 CLASSES AND KINDS OF CREDIT INSTRUMENTS 4

Open Book Account.

also called as "book credit"
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This instrument covers

transactions whereby the seller
The Case of the Trade Acceptance
bills the buyer for the amount of
This acceptance may be described
the goods at the time agreed
as an acknowledgement of a debt
upon and at the time of sale,
by the buyer, in favor of the seller,
which is recorded in the book of
for merchandise that the seller had
original entry of the former.
placed in the hands of the buyer
with which to pay this debt.
 CLASSES AND KINDS OF CREDIT INSTRUMENTS 4

The Promissory Note

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As a credit instrument, it is
executed by the maker who, as is
logical to expect, is the debtor who
promises that he will pay the seller
the amount owed at a certain
future but determinable time.

TWO KINDS OF PROMISSORY NOTE
Negotiable promissory Note
confer upon their holders a
number of distinct advantages
which are absent in the case of
the non-negotiable type
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Non-Negotiable Promissory Note
is a genuine document that acknowledges a
loan received and promises to repay it on the
specified date and under the agreed-upon
conditions. When someone signs a non-
negotiable promissory note, they are legally
obligated to honor it as a legitimate debt
 CLASSES AND KINDS OF CREDIT INSTRUMENTS 4

Bill of Exchange.
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Describes it as "an unconditional

order inwriting addressed by one
person to whom it is addressed to
pay on demand, or at a fixed or
determinable future time, a sum
certain in money or to the order of
a specific person or bearer."
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TWO KINDS OF BILL OF EXCHANGE
Foreign Bill Domestic Bill
Domestic bill is one
wherein the parties
A foreign bill is legally
(drawer and drawee)both
defined as one wherein the
reside in the same country.
drawer and the drawee
reside in two different
countries.

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 CLASSES AND KINDS OF CREDIT INSTRUMENTS 4

Acceptances
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form of a draft ,that is, an order drawn by

one person upon a bank or another party
(individual or commercial house)directing
it to pay a stated sum of money either to
the drawer or to some third person. If the
drawee(the party ordered to make
payment) agrees to "accept" it, meaning to
honor the draft, the instrument becomes a
commercial paper.
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KIND OF ACCEPTANCES
Bank Acceptance
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are commonly used in

connection with
foreign trade

Credit Cards
cards to support the
purchase of goods
and services on credit
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OTHER IMPORTANT DOCUMENTS
Letter of Credit Bill of Lading
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may be described as a letter issued by a "a written account of goods shipped by any
bank authorizing a designated person, signed by the agent of the owner of the
individual firm, or corporation to draw vessel, or by its master, acknowledging receipt of
the goods, and promising to deliver them safe at
on it up to the total amount for which
the port directed, damages of the sea excepted."
the credit is established
Three important purposes are served by a bill of lading,
1. It conveys title to the merchandise;
2. It is a receipt of acknowledgment of the goods signed by the carrier;
3. Itservesasacontractoftransportationbetweentheshipperandthecarrier.
 OTHER IMPORTANT DOCUMENTS 10
Trust Receipt
"receipt given by an importer who has loaned money upon
imported goods, or guaranteed the release of the goods,
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vesting title in the lender although the goods are in the

possession of the importer."

Warehouse Receipts
"a written acknowledgment by a warehouseman (licensed by the
government) that he holds certain goods, identified by the
receipt, for the person to whom the writing is issued; also a
contract by which the warehouseman agrees to deliver the goods
to the holder."
 OTHER IMPORTANT DOCUMENTS 10
Obligation to Deliver
A warehouseman, in the absence of some lawful
excuse provided by the Warehouse Receipts Law, is
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bound to deliver the goods upon a demand made

either by the holder of a receipt for the goods or by
the depositor,
Liability for Mis-delivery
Where a warehouseman delivers the goods to one
who is not in fact lawfully entitled to the
possession of them
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Warehouse Receipts as Collateral
In order that warehouse receipts issued against goods stored in the
borrower's warehouse may be used as a collateral for a loan sought
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from a bank, it is doubtless necessary that the warehouse be

completely removed from the custody and control of the borrower.

Mortgage.
(from the Latin "mortus" meaning dead, and"vas" signifying a pledge)and the Old
French mortgage, literally a deathgage or pledge is a conveyance of property as
security for a debt, which is lost or becomes dead to the debtor if the money or the
interest due there upon is not paid on a certain day
-may then be defined merely as a conditional conveyance of property as security for
the payment of a debt or the performance of some other obligation.
 OTHER IMPORTANT DOCUMENTS 10
Pledge
or pawn, in law, is a "bailment of goods "by a debtor to his creditor to be kept till the debt is
discharged. The term is also used to denote the property which constitutes the security.
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Pledge is thepignus of Roman law from which most of the modern law on the subject is
derived.
Objects of Pledge
All movables which are with in the commerce of man may be pledged, provided they
are susceptible of possession.
Essential Requisites to Pledge and Mortgage
The following requisites are essential to the contracts of pledge and mortgage:
1. That they be constituted to secure the fulfillment of a principal obligation;
2. That the pledgor or mortgagor be the absolute owner of the thing pledgedor mortgaged;
3. That the persons constituting the pledge or mortgage have the free disposal of their property,
and in the absence thereof, that they may be legally authorized for the purpose.
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