TO MAKE A DRAFT
But let us suppose that the draft is all right and that a merchant, let us call him Henry Thomas, and suppose him a resident of Philadelphia, has a bill against James Taylor, of Cleveland, and he wants to collect it, without recourse to law. How will he go about it? The bill is for $100.
Mr. Thomas writes this draft:
Philadelphia, Pa., Sept. 5, 1910.
At sight pay to the order of
Johnson National Bank of Philadelphia
One hundred................... dollars.
With exchange and charge same to Henry Thomas. To James Taylor, Cleveland, Ohio.
Having drawn his draft, Mr. Thomas takes it to the Johnson National Bank for collection. The collection is actually made by some bank in Cleveland to which the Johnson has endorsed it over.
If Mr. Thomas wished he might have sent his draft direct to the Cleveland bank, but he no doubt thought it better to transact such matters through his own bank. Or if Mr. Thomas lived where he was not in touch with a bank, he
might have drawn through any person whom he knew in Cleveland. On receiving the draft for collection, the Cleveland bank would at once give it to a clerk who would without delay present it to Mr.
Taylor. Mr. Taylor, having written his acceptance of the draft, is given
three days grace in which to make payment.
In states where days of grace are not allowed, he would have to pay at once. Mr. Taylor writes the word "accepted," with the date and his name across the face of the draft, and if he does not pay cash, he states in the writing where payment will be made. Of course, Mr. Taylor cannot be compelled to accept a draft. There may be good and honest reasons for his not doing so, but having accepted it, in business honor he is bound to pay it.
The term "Sight draft" explains itself, but the order to pay a draft may indicate, and often does, the number of days allowed for payment, after presentation.
FOR COLLECTION
What should be done by the man to whom a bill or a note is due,
when the debtor lives in a place where there is no bank?
In that case he must learn in some way the name of a promising
person to make the collection for him.
In this case he makes out the draft as before, and adds the words
"for collection." This acts as a bar to any transfer of the paper.
Most banks refuse to handle a draft marked "for collection."
DISHONOR
Drafts are not necessarily duns.
Some country merchants prefer to pay their bills to wholesalers in that way, so that collecting drafts is no small part of the business of the ordinary bank. While men are not compelled to meet drafts when presented, if the
amount is due and he defaults or refuses to pay he injures his own credit.
In refusing a just draft he is said to "dishonor" it.
So sure are wholesalers that their drafts will be met by their
distant debtors that they do not hesitate to draw against them
when deposited for collection, regarding them as cash to their
credit in bank.
PROTESTS
When a draft is not accepted or paid when due, if it be a time
draft, it is protested in the same way as a note.
The protest of a draft serves as a notice to the drawer of its
non-acceptance.
Like notes and checks, drafts may be transferred by a similar
endorsement.
