Draft

An order drawn by one person on another for the payment of money to a third. It is generally payable at or collectable through a bank or other financial agency. There is practically no difference between a draft and a bill of exchange. The term draft, however, is commonly applied to an order for money payable within the United States, the term bill of exchange being applied to an order payable in a foreign country. A promi ory note is a bill of exchange, but a time draft becomes, in fact, a note upon its acceptance by the drawee—the one upon whom it is drawn. The distinction between a draft and a check is material in some respects. A draft is dependent for its payment upon its acceptance by the person on whom it is drawn. In case the one on whom it is drawn refuses to accept it or pay it no criminal liability attaches to the drawer, whereas a check is drawn against a supposed deposit of money or a previously established credit and should there be 7. J = no funds to meet it the drawer is liable to criminal prosecution, and a refusal of the bank on which a check is drawn to pay it, if there are funds in hand, subjects the bank to civil action for injury to the drawer’s credit and reputation. After a draft is accepted it becomes a promise to pay on the * part of the acceptor and he can be held thereon as on a note. The holder of a draft who gets it discounted at his bank must indorse it and thus he also becomes responsible for it. If it goes through several hands each holder must indorse it before parting with it. It acquires strength with each indorsement since all the persons who have indorsed it are succe ively responsible for its payment. In the case of a draft made in one state and accepted for payment in another state any question as to its legality must be tested in the state where it is payable. When the question of interest is involved interest is chargeable at the legal rate of the state where the draft is payable. Also see Bill of exchange. 178