DRAFTS 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. 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, of non-acceptance or non-payment, and the parties liable are formally notified. Drafts Drawn at Sight or on Demand are not presented for acceptance, but for payment only. A Promise to Accept a Draft will be equivalent to an acceptance if it has given credit to the bill. 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. Bank Drafts.-A draft made by one bank upon another is called a bank draft. This is the most common kind. (See page 159 ) 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 intend 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.) $50.00 FORMS OF DRAFTS To One's Own Order Lincoln, Ill., Feb. 2, 1911. Ten days after sight pay to my own order Fifty Dollars, and charge to J. H. JONES. To William Hill, Lincoln, Ill. $100.00 Sight Draft Davenport, Iowa, June 3, 1911. FRANK LAWLER. At sight pay to the order of Henry Starr One Hundred Dollars, and charge to the account of To William Dix, Chicago, Ill. $50.00 Time Draft St. Joseph. Mich., June 1. 1911. At ten days' sight pay to the order of Warren Hazelteen at St. Joseph National Bank Fifty Dollars. Twenty days from date pay to J. R. Kotter, or order, Three Hundred and Twenty Dollars. Value received To Wm. K. Asire, St Paul, Minn. JAMES CLARK. 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. Drawn by a Chicago bank, in favor of James M. Harris, on a bank în New York. This is called a "New York draft.' returned to the bank issuing it. The cancellation mark shows it has been paid in New York and SET OF FOREIGN BILLS OF EXCHANGE FORM 1 Exchange for £100 Chicago, Ill., March 5, 1911. Ninety days after sight of this our First of Exchange (second and third of the same date and tenor unpaid) pay to the order of Chas. Wilson One Hundred Pounds Sterling, value received, and charge the same to Henry Horman & Co. To the Commercial Bank of Glasgow, No. 642 FORM 2 Glasgow, Scot. Exchange for £100. Chicago, Ill., March 5, 1911. Ninety days after sight of this our Second of Exchange (first and third of the same tenor and date unpaid) pay to the order of Chas. Wilson One Hundred Pounds Sterling, value received, and charge the same to Henry Horman & Co. To the Commercial Bank of Glasgow, No. 642 FORM 3 Glasgow, Scot. S Exchange for £100. Chicago, Ill., March 5, 1911. Ninety days after sight of this our Third of Exchange (first and second of the same tenor and date unpaid) pay to the order of Chas. Wilson One Hundred Pounds Sterling, value received, and charge the same to No. 642 Henry Horman & Co. To the Commercial Bank of Glasgow,} Glasgow, LETTERS OF CREDIT A Letter of Credit is a letter from a bank or mercantile house addressed to its agents or correspondents elsewhere, requesting them to pay or advance money to the bearer of the letter. How Secured.—The person who obtains a letter of this kind usually is required to deposit an equivalent sum with the person or firm from whom he obtains it, in money, bonds, mortgages or stocks. A Copy of the Letter is also sent by mail to the person addressed, in which the bearer is so described that he may be recognized. If the Letter is not Accepted by the person to whom it is addressed the bearer should at once notify the author and give the reason why it has not been honored. Party Held Responsible.—The party whose signature the letter bears is held responsible for the amount involved, if the person to whom it is addressed accepts it. FORM OF LETTER OF CREDIT MESSRS. HAVART, REED & Co., London, Eng. 350 Broadway, New York. Jan. 10, 1911. DEAR SIRS: We take pleasure in introducing to you Mr. Chas. P. Hodder of this city, who visits England for the purpose of investing in property in the city or vicinity of London, and desires to open a credit with you of Fifteen Thousand Dollars. We hereby authorize you to honor his drafts to an amount not exceeding in the aggregate the above-named sum and charge the same to us. The signature of Mr. Hodder accompanies this. Signature of Chas. P. Hodder. FOSTER, WALKER & Co. Foster, Walker & Co.'s Letter Sent by Mail MESSRS. HAVART, REED & Co., 350 Broadway, New York, Jan. 10, 1911. GENTLEMEN: We have to-day granted a letter of credit on your house (as per enclosed duplicate) to Mr. Chas. P. Hodder for Fifteen Thousand Dollars. Mr. Hodder is forty-five years of age, five feet ten inches tall, has a light complexion, light brown hair, and blue eyes. Respectfully yours, FOSTER, WALKER & Co. |