Definition Of Draft Or Bill Of Exchange

A draft or bill of exchange is an unconditional order in writing, addressed by one person to another, other than a banker, signed by the person giving it, requiring the person to whom it is addressed to pay, in the United States, at a fixed or determinable future time, a sum certain in dollars to the order of a specified person.

Opinions Of Counsel And Rulings

Relating to the Rediscount of Drafts and Trade Acceptances

Extension Of Time For Notes Or Drafts

A note or draft containing a provision for an extension of time should not be approved for general use by the Federal Reserve Board.

Presentment Of Bills For Acceptance

The drawer and indorser of a bill of exchange made payable on the date specified in the bill are not discharged by a failure to present for acceptance, unless the bill expressly provides that it must be presented for that purpose, or unless it is payable elsewhere than at the residence or place of business of the drawee.

Acceptor Not Affected By Waiver

The acceptor of a bill of exchange is the principal debtor. The law requires that notice of demand and protest be given to parties secondarily liable in case of dishonor. This right to receive notice is a personal one which may be waived by the parties entitled thereto, that is, the drawer and indorser; but such waiver has no affect on the acceptor or principal debtor.

Negotiability Of Drafts And Trade Acceptances

Effect Of Waivers

The negotiability of a bill of exchange is not affected by provisions which waive demand, notice and protest; which waive homestead exemption rights; and which provide for the costs of collection and attorney's fees.

Drafts Payable On Condition

A draft made "payable on arrival of car" is non-negotiable, not being payable at a determinable future time.

Drafts Payable With Interest

A provision in a draft or bill of exchange that it is payable "with interest at the rate of---------°/o per annum after maturity, if payment is delayed." does not affect the negotiability of an instrument.

Charges Before And After Maturity

A bill drawn for a fixed sum "with collection charges" is not a negotiable instrument unless it is so drawn as to show that no collection charges are to be included unless the bill is dishonored at maturity. A bill containing a provision for payment of the costs of collection of attorney's fees if it is dishonored at maturity is a valid negotiable instrument.

Exchange And Collection Charges

A bill made payable with "collection charges" is not a negotiable instrument, though the negotiable instruments law provides that an instrument payable "with exchange" does not lose its negotiability. It is suggested by counsel that the amount of exchange is usually ascertainable in advance while collection charges are not so ascertainable.

Drafts Payable To Order Of Drawee

A bill made payable to the order of the drawee is not negotiable until the drawee as payee has indorsed it. When it has been accepted and indorsed by the payee it is a valid negotiable instrument in the hands of a third party, and the drawer is not released, since the terms of his order have been specifically complied with.