To the order

economic-dictionary

The order is called the method of payment for goods and services that consists of setting a specific date for the payment of the amount. In turn, the right of collection can be transmitted or assigned to third parties.

The fact of committing a particular transaction to the order has the advantage of guaranteeing an acquisition in the present without having the need to have the economic resources at the same time.

At the same time, the fact that a document is issued under this economic circumstance means that it can be transmitted to third parties. In other words, the commitment to collect a certain amount can be voluntarily assigned or endorsed to others without modifying the amount or the deadline, among other conditions set.

Thanks to the high ease of endorsement and its ease of collection in many financial institutions, this modality is widespread, since it does not cause administrative slowdowns. At the same time, it allows economic agents the possibility of financing for purchases in exchange for a future payment in a short term.

However, the assignments of collection rights under this modality are treated in their entirety, not allowing assignments or endorsements for partial amounts. Each title therefore has an indivisible commercial value.

Main business uses passed on to order

A great variety of commercial bills or securities such as checks, promissory notes or bills of exchange are payment commitment documents subject to being conditioned by this method on a regular basis.

The most common in these cases is to use the form to order in purchases of goods or services with payments deferred to 3 months on average. In other words, these pay-to-order documents are commonly used in low-value business transactions. These documents can also be called titles to the order.

The use and collection of a title to the order is agile and adapted to all types of natural or legal persons. Small suppliers and merchants accustomed to the continuous purchase and sale of materials in their economic activity are used to dealing with this type of payment mechanisms.

Example of to order

Suppose that they want to repay us by means of a promissory note to order. That means that we can give that promissory note (which is in our possession) to another person (assign it). Why would we want to give it to someone else? Let's imagine that we have to pay a bill. At that time we do not have cash, as the promissory note is a commitment to pay. Since we need to make the purchase, we agree with the seller to give him our promissory note for the value of the purchase. As it is a promissory note to order, it is allowed for a third party (the seller) to later collect that promissory note.

Tags:  passes USA history 

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