A "draft" is a written order drawn by one party called the drawer on another party called the drawee for the payment of money to a third party called the payee, the amount to be paid from funds which the drawee owes to the drawer. The terms "drafts" and "bills of exchange" are often used in referring to the same things. There is not a great deal of difference between them, although such instruments used in interstate or international transactions are termed "bills of exchange," and in transactions with foreign countries are usually drawn in duplicate. When either "drafts" or "bills of exchange" are referred to in this chapter, the remarks made will apply to both drafts and bills. For instance, A owes B $1,000. C owes A $1,000. So A gives B a piece of paper which orders C to pay $1,000 to B. Drafts are valuable chiefly because they are negotiable - that is, B could indorse the above draft to D, who would then have a right to the $1,000. Drafts frequently pass through many hands before they are presented for payment.

The Parties

There are always three parties to a draft: (1) the drawer, (2) the drawee (or payer), and (3) the payee. Only a drawee may become an acceptor. In the accompanying illustration A is the drawer, C the drawee, and The First National Bank the payee. The drawer is the maker or person who orders one person to pay another. The drawee is the person who is ordered to pay the money. The payee is the person to whom the money is to be paid. In writing a draft it is customary, though not necessary, to place the name of the person who is to pay it - the drawee - in the lower left hand corner. (Checks are a special kind of bill of exchange and are considered in another chapter.) The bill is addressed to the drawee. A draft drawn payable at sight or on demand should be paid by the drawee when the draft is first presented to him. If the draft is a time bill, drawn payable a certain number of days after sight, a certain number of days after date, or at some stated future time, the draft will be presented to the drawee who will be asked to show his intention to honor the bill - that is, to pay it - at maturity.

Specimen Form Of Draft

No Protest Tear This Off Before Presenting


__________________________________________________________Pay to the

Order of The FlRst National Bank $--------


Value received, and charge the same to account of c




Before the words "pay to" the time when the draft is due should be inserted - as "at sight" or "30 days after 3

Simple Form Of A Bill Of Exchange

Chicago, I11., May 22, 1922. Pay to the order of Norman T. Detwiler One thousand dollars ($1,000).

Paul B. Ritter. To William F. Hayes, 211 Prairie St.,

Cincinnati, Ohio

This intention is usually shown by writing the word "accepted" together with the date, place of payment and the drawee's signature across the face of the bill. If he does this, he becomes the "acceptor." The only instance of the acceptance of a sight bill is really not entitled to the use of the word "acceptance," as it means simply that the drawee writes on the bill instructions to his banker to have the draft paid and charged to his account. Since this is to be effected on the same date the time element that we associate with the word "acceptance" is lacking.