Match each credit instrument or form of credit listed in Column A with its corresponding legal feature or operational description in Column B.
- Bill of ExchangeAn unconditional order in writing addressed by a creditor to a debtor, requiring payment of a specified sum at a fixed or determinable future date.
- Promissory NoteAn unconditional written promise made by a debtor to pay a specified sum of money to a creditor on demand or at a fixed future date.
- Letter of CreditA financial document issued by a bank guaranteeing payment to an overseas exporter upon submission of specified shipping documents.
- Hire PurchaseA system of credit trading where possession of goods passes immediately to the buyer, but legal title remains with the seller until the final instalment is paid.
Answer
The correct pairings are: Bill of Exchange corresponds to the unconditional order in writing addressed by a creditor to a debtor; Promissory Note corresponds to the unconditional written promise made by a debtor to pay a creditor; Letter of Credit corresponds to the financial document issued by a bank guaranteeing payment in foreign trade; and Hire Purchase corresponds to the credit trading system where legal title remains with the seller until the final instalment is paid.
Each instrument and form of credit is matched to its essential legal definition: a Bill of Exchange is an order drawn by a creditor instructing payment; a Promissory Note is a promise issued by a debtor to pay; a Letter of Credit is a bank guarantee supporting international trade; and Hire Purchase restricts legal ownership transfer until the completion of all agreed instalments.
Step-by-Step Solution
Key Concept
Forms and Instruments of Credit