This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In accordance with the principles which apply to orders, a draft does not amount to an assignment of a debt owing by the drawer to the drawee as long as it is not accepted, since it does not purport to convey any designated fund.1 So if the drawee makes an assignment before acceptance the payee has no claim against such assignee.2 So if the drawer makes an assignment after giving the draft and before it is presented for payment the funds in the hands of the drawee should be paid to the assignee.3 So if a creditor of the drawer attaches the funds of the drawer in the hands of the drawee before the draft is accepted such creditor obtains priority over the payee.4 This rule has been applied where the draft is for the exact amount of the debt due from the drawee,5 or for a less amount,6 or where a particular fund has been designated out of which the drawee is to be reimbursed, as long as the draft is payable generally on acceptance by the drawee.7
5 McDaniel v. Maxwell, 21 Or. 202; 28 Am. St. Rep. 740; 27 Pae. 952.
6 Nelson v. Bennett Co., 31 Wash. 116; 71 Pac. 749.
7 Andrews v. Frierson, 134 Ala. 626; 33 So. 6.
8 Cashman v. Harrison, 90 Cal. 297; 27 Pac. 283; Talladega Mercantile Co. v. Robinson, etc., Co., 96 Oa. 815; 22 S. E. 1003; Baer v. English, 84 Ga. 403; 20 Am. St. Rep. 372: 11 S. E. 453; Abt v. Savings Bank, 159 111. 467; 50 Am. St. Rep. 175; 42 N. E. 856 (controlled by New York law) ; Grammel v. Carmer, 55 Mich. 201; 54 Am. Rep. 363; 21 N. W. 418; Lewis v. Bank, 30 Minn. 134; 14 N. W. 587; Kimball v. Donald. 20 Mo. 577; 64 Am. Dec. 209; Erickson v. Inman, 34 Or. 44; 54 Pac. 949; Commonwealth v. Ins. Co., 162 Pa. St. 586; 42 Am. St. Rep. 844; 29 Atl. 660; Akin v. Jones, 93 Tenn. 353; 42 Am. St. Rep. 921; 25 L. R. A. 523; 27 S. W. 669.
2 Abt v. Savings Bank, 159 111. 467; 50 Am. St. Rep. 175; 42 N. E. 856. So where a receiver is appointed for the drawee. Bos worth v. Bank, 64 Fed. 615; 12 C. C. A. 331.
3 Covert v. Rhodes, 48 O. S. 66; 27 N. E. 94.
4 Baer v. English, 84 Ga. 403; 20 Am. St. Rep. 372; 11 S. E. 453.
In some jurisdictions it has been held, apparently contrary to the intention of the parties, that a draft for the whole amount due from the drawee to the drawer is an assignment of such fund.8 In other jurisdictions a draft for part of the amount due from the drawee to the drawer is an assignment in equity.9 By agreement outside the draft the parties may cause it to operate as an assignment to the payee of the funds in the hands of the drawee.10 Thus a letter asking the drawee to pay to the holder of the draft the amount due to the drawer even if the drawee should not pay the draft is an assignment.11 A direction to the consignee of goods to apply the proceeds to paying a bill of exchange does not effect an assignment unless the bill was negotiated under an agreement that such proceeds should be applied to its payment.12 If the bill of exchange is accepted,13 even if it is drawn on the drawee at his previous request,14 it effects an assignment of the funds in the hands of the drawee.