Management and Organizational Studies 2275A/B Chapter 26: The Legal Aspects of Credit
Document Summary
Credit arrangement may be formal and deliberate with carefully negotiated terms or incidental feature of routine transactions. Credit is a contractual relationship, with the lender agreeing to lend money in exchange for a promise by the borrower to repay the loan, usually with interest and within a certain time frame. The law of credit forms part os debtor and creditor law. Ex: hometown will be both a borrower (debtor) and a lender (creditor); When hometown buys lumber from its suppliers, it is required to pay the invoice within 30 days, making it debtor. When hometown sells the lumber to its commercial customers, those customers are expected to pay, making hometown creditor. Secured credit : a debt where the credit has an interest in the debtor"s property to secure payment. Unsecured credit : a debt where the creditor has only a contractual right to be repaid.