Future Business Leaders of America (FBLA) Business Law Practice Exam

A party that receives goods or services with the promise to pay later is known as what?

1. Debtor

2. Creditor

3. Provider

4. Guarantor

The correct answer is: Debtor

The correct answer is that a party receiving goods or services with the promise to pay later is known as a debtor. A debtor is an individual or entity that owes a financial obligation to another party, which often arises when they receive goods or services but do not make immediate payment. In this context, the debtor has committed to making payment at a later date, establishing a credit relationship with the provider of the goods or services. Understanding the role of a debtor is critical, as they are the party responsible for fulfilling the agreement to pay for the received goods or services within the established terms. This relationship forms the basis of many commercial transactions and credit arrangements in business law, where trust and the expectation of payment are essential. The other roles mentioned, such as creditor, provider, and guarantor, represent different functions in financial transactions and agreements. A creditor is a party to whom money or goods are owed, while a provider usually refers to the party supplying goods or services. A guarantor is someone who agrees to be responsible for the debt or obligation of another if that party fails to meet their obligations. Recognizing these distinctions is essential for understanding the dynamics of financial obligations and agreements in business law.