Importance of Negotiable Instruments in the Modern Business Transactions

The history of business transaction drives back to the simple business contract of barter.  Reliance on commercial paper of today is a huge contribution to any business deals and contracts. Take for example a simple business trade of buying a merchandise and the buyer would pay a check drawn from his/her checking account, huge trust given by the seller is an automatic binding agreement whereby failure of the buyer to supply the equal amount of money written in the negotiable instrument is subject to legal argument.  Further importance of commercial paper relates to the contract’s importance equivalent to a monetary standard.  By law, commercial paper is as good as payment for any good sold in any given public market.  In addition, International law and commerce are collaborating commercial paper formats to simplify the trade transactions in terms of International Business.  Uniformity of commercial codes is the fundamental key to realize a global realization of International law and commerce.


Promissory Notes:
Is the simplest form of commercial paper that the maker of the note will promise to payee in a suggested time and most importantly the right monetary amount to be paid to the payee.  Above all, both parties must have a written authentic signature to verify the originality of the contract being stipulated.

Certificates of Deposit:
A Certificate of Deposit is issued by the third party financial institution represented by a bank to verify the containment of the instrument.  There are two important aspects that commercial people must consider in terms of certificates. First, is the acknowledgement of the bank or the financial institution that the instrument is true and being written in good faith.  Second, is the written promise by the bank written in the certificate that the amount would be paid in a certain date or time.

A draft involves three parties commonly known as the drawer, drawee, and the payee.  The drawer usually orders the drawee to pay a certain amount to the payee or the person specified to receive the amount of money.

A check is also a kind of draft payable only on demand and maybe drawn on a bank.  The bank may be considered as the drawee or the person to whom the order to pay is addressed.