Definition of draft


search - explain draft

draft -- a written order signed by one party (the drawer) requesting a second party (the drawee) to pay a specified amount of money to a third party (the payee) at some future time. A check is a draft.

historic definition...

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 promissory 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 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 successively 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.

About the author

Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".

Copyright © 2005 by Mark McCracken, All Rights Reserved. is an informational website, and should not be used as a substitute for professional financial or legal advice. and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.