( Originally Published 1918 )
Rules for Writing, Accepting and Transferring
What a Draft Is. A draft is a written order by one person or firm upon another for the payment of a specified sum of money.
Names of Parties. The one who writes the draft is called the drawer, the one on whom it is written is called the drawee, and the one to whom it is to be paid the payee.
When Payable. Drafts may be made payable at sight, on demand, or at a certain time after date or after sight.
Negotiability. Drafts are negotiable both before and after acceptance if made payable to order or bearer.
Drafts May Be Drawn to One's Own Order, and then indorsed in favor of the party to whom they are to be sent.
Acceptance. By acceptance is meant the act by which a person, upon whom a draft is drawn, binds himself to pay it when due. This usually is done by writing the word "Accepted," together with the date, in red ink across the face of the draft and signing the acceptor's name below.
When Acceptance is refused, it is said to be dishonored, and the drawer and indorser are held liable for payment. The draft is then protested.
Protest.-A protest is a formal declaration made by a notary public, under his hand and seal, at the request of the holder, or non-acceptance or non-payment, and the parties liable are formally notified. It is the practice of all banking institutions to protest all notes not paid at maturity, and checks presented when there are no funds to meet them. Protest may be made by the debtor.
Drafts Drawn at Sight or on Demand are not presented for acceptance, but for payment only.
Promise to Accept a Draft will be equivalent to an acceptance if it has given credit to the bill. In some states the promise to accept is required by statute to be in writing.
Any Material Alteration of a draft after it has been drawn or accepted makes it valueless.
Death of Drawee. Should the person upon whom the draft is drawn die before it is accepted, it should be presented to his legal representatives. By statute in some states a demand draft may be paid within a limited time after the death of drawee.
Bank Drafts. A draft made by one bank upon another is called a bank draft. This is the most common kind.
In Buying a Draft at the Bank, it is always best to have it made payable to yourself, and then indorse it in favor of the person to whom you in-tend to transfer it. This gives you a good receipt for the money.
Drafts on Foreign Countries are called bills of exchange. (See Bills of Exchange.)
Forms of Drafts TO ONE'S OWN ORDER $50.00 Lincoln, IIL, Feb. 2, 19-.
Ten days after sight pay to my own order Fifty Dollars, and charge to J. H. Jonas.
To William Hill,
$100.00 Davenport, Iowa, Aug. 3, 19--.
At sight pay to the order of Henry Starr One Hundred Dollars, and charge to the account of
To William Dix, FRANK LAWLER. Chicago, Ill.
$50.00 St. Joseph, Mich., Nov, 1, 19--.
At ten days' sight pay to the order of Warren Hazelteen at St. Joseph National Bank Fifty Dollars. Value received. To H. R. Moser, CHAS. HUNTER. Lansing, Mich.
TIME DRAFT, SECOND FORM
$320.00 St. Paul, Minn., Oct. 1, 19--.
Twenty days from date pay to J. R. Kotter, or order, Three Hundred and Twenty Dollars. Value received. To Win. K. Asire, JAMES CLARK. St. Paul, Minn.
BILLS OF EXCHANGE
How Drawn. Bills of exchange, as drafts on foreign countries are usually called, are drawn in sets of three, each one referring to the other two. They are alike, except that they_ are numbered first, second and third. If the first, which is usually kept by the purchaser to be presented by himself for payment at the foreign bank, is lost, then the second or third, being sent by mail, may be used. The payment of one cancels the other two. To distinguish them from other drafts they are sometimes called foreign bills of exchange, and the others are sometimes called inland bills of exchange.
The bank selling a Bill of Exchange, having money deposited in a foreign bank, orders the bill cashed there. In this way travelers are saved the trouble and risk of carrying large amounts of money with them. Merchants engaged in foreign trade also find them very convenient, and make all their payments through Bills of Exchange.