Definition
In general: A “maker” refers to the producer of a product. For example, an automobile maker is a company or person that manufactures cars.
In commercial law: A “maker” is the individual or entity that executes a promissory note or endorses it before it is delivered to the payee. This individual or entity thereby assumes an obligation to make a payment on the note.
Examples
- Automobile Manufacturer: Toyota is a maker of cars, producing vehicles for a global market.
- Promissory Note Maker: John Doe signed a promissory note to borrow $5,000 and repay it over two years. John is the maker of the note and is obligated to make the payments as specified.
- Endorser on a Note: Jane endorses a note to loan her friend $10,000. By endorsing it, she becomes the maker and assumes the obligation to ensure the payment is made to the payee.
Frequently Asked Questions
Q1: Who can be considered a maker in commercial law? A: A maker in commercial law is typically the person who signs a promissory note, involving them in the obligation to repay the amount specified in the note.
Q2: Is the term “maker” only used in manufacturing contexts? A: No, the term “maker” is not limited to manufacturing. In financial contexts, it specifically refers to someone who executes or endorses a promissory note.
Q3: What is the difference between a maker and a payee? A: The maker is the one who executes or endorses the note and takes on the obligation to pay. The payee is the person to whom the payment is to be made.
Related Terms
- Endorser: A person who signs the back of a note or other negotiable instrument, often pledging to pay if the original maker defaults.
- Payee: The person or entity that is to receive the payment.
- Promissory Note: A financial instrument in which one party promises in writing to pay a determinate sum of money to the other under specified terms.
- Obligor: The person or entity obligated to provide payment or performance under a contract.
Online Resources
Suggested Books for Further Studies
- “Business Law and the Regulation of Business” by Richard A. Mann and Barry S. Roberts
- “Financial Accounting Essentials You Always Wanted To Know” by Vibrant Publishers
- “Commercial Paper in a Nutshell” by Mary Beth Matthews
Fundamentals of Maker: Commercial Law Basics Quiz
### Who can be considered a maker in a commercial note?
- [x] The individual who signs the promissory note.
- [ ] The bank that issues checks.
- [ ] The payee receiving the funds.
- [ ] The underwriter of a bond.
> **Explanation:** The individual who signs the promissory note assumes the obligation to pay and is thus considered the maker.
### What is the key responsibility of the maker in a promissory note?
- [x] To ensure the payment is made as specified.
- [ ] To endorse the note to a third party.
- [ ] To provide collateral.
- [ ] To guarantee the note through bonds.
> **Explanation:** The maker is responsible for ensuring the payment of the amount specified in the note as agreed upon.
### Can a company be a maker of a promissory note?
- [x] Yes, companies can issue and sign promissory notes.
- [ ] No, only individuals can be makers.
- [ ] Only banks can be makers.
- [ ] Companies can never bear any financial obligations.
> **Explanation:** Companies, like individuals, can issue and sign promissory notes and thus become makers obligated to repay the specified amount.
### Which parties are commonly involved in a promissory note transaction?
- [x] Maker and payee
- [ ] Treasurer and receiver
- [ ] Principal and agent
- [ ] Landlord and tenant
> **Explanation:** A promissory note transaction involves the maker, who promises to pay, and the payee, who is to receive the payment.
### What is a common synonym for "maker" in finance?
- [ ] Insurer
- [ ] Mortgagor
- [x] Obligor
- [ ] Agent
> **Explanation:** In financial contexts, the term "maker" is often synonymous with "obligor," as both refer to a party responsible for fulfilling an obligation.
### What happens if the maker defaults on paying a promissory note?
- [x] The endorser may be liable if they endorsed the note.
- [ ] The payee must absorb the loss.
- [ ] The maker is exempt from further obligations.
- [ ] The note becomes invalid.
> **Explanation:** If the maker defaults, any endorser who backed the note may be held liable for the payment.
### Why is the role of a maker crucial in commercial transactions?
- [x] They ensure the obligation to pay is met.
- [ ] They secure collateral.
- [ ] They act as intermediaries.
- [ ] They decide interest rates.
> **Explanation:** The maker's role is crucial as they provide the commitment and obligation to fulfill the payment terms specified in commercial instruments like promissory notes.
### Could an automobile manufacturer be an example of a maker?
- [x] Yes, as a producer of cars, they are makers in a manufacturing context.
- [ ] No, manufacturers don't count as makers.
- [ ] Only makers of promissory notes fit the definition.
- [ ] Only retail sellers are considered makers.
> **Explanation:** An automobile manufacturer is an example of a maker in the general context of producing goods.
### What legal document signifies someone as a maker in commercial law?
- [ ] A lease agreement
- [ ] A warranty deed
- [x] A promissory note
- [ ] A buy-sell agreement
> **Explanation:** In commercial law, someone becomes identified as a maker when they sign a promissory note, taking on the payment obligation.
### Who assumes liability for payment if a maker adds an endorsement to a note?
- [ ] The payee
- [x] The endorser
- [ ] The holder in due course
- [ ] The trustee
> **Explanation:** If the maker includes an endorsement, the endorser may assume secondary liability for the payment, ensuring obligation fulfillment if the maker defaults.
Thank you for exploring the comprehensive meaning of “maker” and testing your understanding with our specialized quiz questions. Keep enhancing your financial and commercial law knowledge!
