1 Drafts

A draft is an unconditional written order by which one party directs a second party to pay to the order of a third party or to the bearer a certain sum of money on demand or at a definite time. A draft is also known as a bill of exchange (B/O).

A draft initially involves three parties — the drawer, the drawee, and the payee. The drawer is the person who executes or draws the draft and orders that payment be made. The drawee is the person directed to pay the draft. The payee is the party to whom this commercial paper is made payable.

There are two types of drafts — a sight draft and a time draft. A sight draft is payable at sight or on demand, i.e. when it is presented to the drawee by the one holding the draft. A time draft is payable at a specified time, or at the end of a specified period after sight or after the date of the draft.

2 Cheques

A cheque is a special type of draft by which a bank depositor orders the bank to pay money, usually to a third party. Cheques are usually written on special forms provided by bank for a fee. The forms are usually magnetically encoded. However, cheques may be written on blank sheets of paper, forms or other materials and are still legally payable. The drawee, though, must always be a bank for the instrument to qualify as a cheque.

The bank honours (pays when due) each cheque as long as sufficient funds remain in the depositor’s account. Of course, the bank will retain a sizable percentage of all funds deposited so that it can pay cheques when they are presented.

A person, who deliberately issues a cheque with the knowledge that the funds in the account will be insufficient to pay the cheque, is guilty of a crime. In this case the bank will dishonour the instrument and it will be impossible to get any money from that source.

3 Promissory Notes

A promissory note is an unconditional written promise by one person to pay to the order of another person or to the bearer a certain sum of money on demand or at a definite time.

Promissory notes initially involve only two parties — the maker and the payee. The maker is the one who executes or makes a promissory note and promises to pay. If two or more parties join in executing the note, they are comakers and are equally liable for payment.

Personal property may be pledged to secure performance — that is, to insure payment — of a note. When this fact, together with a description of the property, is stated on the face of the note, the paper is a collateral note. A collateral note typically provides for the sale of the security by the payee if the note is not paid when due.

When real property is a security for payment, the note is a mortgage note. The payee can force a sale of the real property and use the proceeds for payment if the payment is not made when due.

4 Certificates of Deposit

A certificate of deposit (CD) is a written acknowledgement by a bank of receipt of money, with an unconditional promise to repay it. The stated amount is payable with interest at a definite future time, normally ranging from several months to several years.

Banks do not pay out CD’s or other long-term deposits before maturity. A penalty is a sharp reduction in the amount of interest payable on the funds. This inhibits depositors from withdrawing funds prematurely. As a consequence, interest rates on CD’s are significantly higher than on savings or chequeing accounts, where the depositors are far more likely to withdraw from an account.

Vocabulary

commercial paper оборотные кредитно-денежные документы (векселя)

unconditional безусловный, не ограниченный условиями, безоговорочный

to comply (with) исполнять, подчиняться

instrument 1) документ 2) средство

draft тратта (платежное поручение); сининим переводного векселя. Этот термин употребляется в определенных контекстах, связанных, например, с долговыми требованиями.

promissory note простой вексель, долговое обязательство

certificate of deposit депозитный сертификат

IOU долговая расписка

bill of exchange переводная тратта

to charge to account поставить на счет

drawer трассант (лицо, выставившее тратту)

drawee трассат (лицо, на которое выставлена тратта)

payee 1) получатель денег; 2) предъявитель чека/ векселя

to honour a draft 1) оплатить чек/ тратту;

2) акцептировать

sight draft вексель на предъявителя

time draft срочная тратта

form бланк

fee плата, сбор

to retain удерживать

sizeable значительный, существенный

to dishonour 1) отказывать в акцепте (векселя);

2) отказывать в платеже (по векселю)

due срок платежа

comakers совместные векседатели

to execute the note оформлять (документ)

collateral note обеспеченный вексель

prematurely преждевременно

mortgage note ипотечное обязательство; письменное обязательство возвращения долга (обязательство, обеспеченное залогом собственности, является доказательством займа и оговаривает условия его возврата)

before maturity до наступления срока

to inhibit сдерживать

to withdraw 1) аннулировать; 2) отзывать, отменять;

3) изымать

Text 2 Specialized Forms of Commercial Paper in Use

Certain variations of the forms of commercial paper are available for specialized needs. These include certified cheques, cashier’s cheques, bank drafts, money orders, traveller’s cheques.

Certified Cheques

A personal cheque that has been accepted by a bank in advance of payment is known as a certified cheque. At the time of certification, the bank draws sufficient funds from the depositor’s account and sets them aside in a special account to pay the cheque when it is presented. In addition, the bank marks the front of the cheque with “accepted” or “certified”, the date, and the bank’s signature.

Cashier’s Cheques

A cheque that a bank draws on itself and which is issued by an authorized bank officer is a cashier’s cheque. Such cheques are used by banks to pay their own obligations. They also may be purchased from a bank by persons who wish to send remittances (payments) but who either have no personal chequeing account or do not wish to use their personal cheques.

Bank Drafts

A draft drawn by a bank on funds that it has on deposit with another bank is a bank draft. Thus, such a document is a draft drawn by one bank on a second bank. Banks use these drafts in their own transactions. If the seller refuses to accept cheques of customers whose credit is not established he or she may use bank drafts purchased from a bank.

Money Orders

Money orders are often used by persons who do not have chequeing accounts. A money order is a draft issued by a post office, bank, express company, or telegraph company for use in making payment or transferring funds upon the credit of the user. Money orders serve the same purpose as cheques.

Traveller’s Cheques

Hotels and retailers around the world understandably prefer to take cheques only from persons they know and can trust. At the same time travelers do not want to carry cash on journeys. To meet the needs of both the traveler and the merchant, traveller’s cheques have been devised. A traveller’s cheque is a cheque drawn by a reliable financial institution, such as Bank of America or American Express Company, on itself or its agent. At the time traveller’s cheques are purchased, each is signed by the buyer. When cashing the traveller writes in the name of the payee and again signs her or his name as originally is written on the cheque. This is done in the presence of the payee who can compare the signatures. Although traveller’s cheques are still used, the greatly expanded use of credit cards throughout the world has reduced the need for them.

Vocabulary

chequeing account специальный счет, с которого снимаются деньги по чекам клиентов; счет, позволяющий в любой момент снимать и вносить деньги (до востребования)

remittance денежный перевод

certified cheque удостоверенный чек

cashier’s cheque банковский чек

bank draft 1) банковский счет; 2) тратта, выставленная банком на другой банк

money order денежный почтовый перевод

traveller’s cheque туристский чек

express company компания по доставке грузов