Draft (finance)

“ A special form of draft is a “banker’s draft,” an instruction by one bank to another bank, or to a branch of the bank making the instruction, to pay a sum of money to the order of a certain specified person. Other meanings of “draft” are an outline, plan or sketch, or a preliminary drawing up of an instrument, measure, document, &c., which, after alteration and amendment, will be embodied in a final or formal shape; an allowance made by merchants or importers to those who sell by retail, to make up a loss incurred in weighing or measuring ”

“ Frequently open accounts may be neglected by a customer who may find himself for some reason short of immediately available funds, but to neglect the payment of an accepted draft is regarded in the trade and by banks as so serious a matter that the drawee would lose caste with the banks; oversea buyers endeavor in most cases to honor accepted drafts.... ”

“ A letter of this kind rarely fails to bring a goodly percentage of remittances. The mere suggestion of a draft often has the desired effect. The average merchant dislikes to have a draft presented; he feels that it has a tendency to injure his credit with the very man whom he may be obliged to ask for an accommodation—his banker. ”

“ If the inference to be drawn from a time draft accompanied by a bill of lading is, not that it evidences a credit sale, but a request for advances on the credit of the consignment, the consequence is the same. Perhaps it is even more apparent. It plainly is, that the acceptance is not asked on the credit of the drawer of the draft, but on the faith of the consignment. The drawee is not asked to accept on the mere assurance that the drawer will, at a future day, deliver the goods to reimburse the advances: he is asked to accept in reliance on a security in hand. ”

“ Drafts may be “commercial” or “bank” according as the drawee is a merchant or a bank, respectively. B. V. Robbins’ draft on Perkins shown above is a merchant’s draft. A bank draft is a request by one bank on a correspondent bank to pay a given amount of money to a named payee. A customary method of remitting money is by the purchase and remittance of a bank draft, for the issuing of which banks usually charge a fraction of a per cent. To illustrate its use, take the following situation:
L. W. Roberts of Denver owes Field & Co. of Chicago $210 on account. ”

“ A man who wants a loan from a bank applies to the directors, and is told, we can lend you the money, but we do not take notes for our loans—you must give us a draft; but, says the applicant, I have no funds any where to draw upon; no matter, say the bankers, if your [340] draft is not met, or expected to be met, because you have no funds, that need make no difference; you may pay it here, with the exchange, when the time it has to run is out; so the borrower signs a draft or bill of exchange on somebody in New York, Philadelphia, or Baltimore, and pays the discount for the time it has to run ”

“ It is safe to assume that the transmission of money contemplated very generally is accomplished by a draft, and practically never by sending on the identical currency received. One form, at least, of the business aimed at, and, on the face of the bill, that carried on by the plaintiff, is a branch of the banking business. ”

“ The banker in New York who buys a sixty-day draft drawn against a shipment of butter is presumably not an expert on the butter market and if he should be forced to sell the butter, might not be able to do so to the fullest possible advantage. Employment of an expert agent is an expensive operation, and, moreover, there is always the danger of legal complication arising out of the banker's having sold the collateral. It is desirable in every way that if there is to be any trouble about the acceptance or payment of a draft, the banker should keep himself out of it. ”

“ But in connection with banking and in ordinary commercial parlance it means money taken to a bank, left there, and understood to be subject to check or draft. [2] Money thus deposited and drawn on enters largely into the commerce of the country: checks and drafts are mercantile instruments, part of the machinery of trade, having commercial value and bearing no resemblance to the 'pass-book' held by the poor seamstress, or washerwoman, or cook, who can go but four times a year and after notice to have a debit entered in it. ”

“ Again, the terms offered by the bankrupts to their correspondents seem to us to promise the appropriation of a specified fund to the draft as little as they promise to apply the money received by them to that end. They are to provide the drawee banks with sufficient funds for the payment of the drafts by transfer of credit from our balance 'or otherwise.' They are to provide, that is, as convenient to themselves, for payment by the drawee banks, not to give them an earmarked corpus to be handed over. ”

“ If the bank proceeds against the seller as the drawer of the draft, when the latter pays and takes up the bill of lading he can similarly realize on the security, or get the goods back, because he will have a bill of lading in his possession which runs to his own order. ”

“ When a sufficient amount of cotton has been accumulated the local banker, at the request of the buyer’s agent, delivers the tickets in question to the local agent of the railroad, who in turn issues a bill of lading covering the shipment to the compress point, which then is attached to the draft drawn by the buyer’s agent upon the buyer’s head office, which draft includes the price paid for the cotton plus interest and exchange charged by the local banker, who is reimbursed for the amount of the draft thus drawn. ”

“ An accepted draft is only another form of a promissory note, for if A owes B $1,000, and B draws upon A for that amount, and A accepts the draft, A is in precisely the same position as he would have been if he had sent B his promissory note for $1,000. ”

“ There is nothing to prevent his making it for one hundred dollars, or fifty dollars, or ten dollars. There is nothing to prevent the use of bank paper; and the draft will have the number of signatures usual to bank paper. It will or may be signed by the treasurer, register, and comptroller.
Now, sir, let me suppose that a citizen has a demand upon the government for five thousand dollars, and applies to the treasurer for payment. On what receiver-general will you, he will be asked, have the amount? On the receiver-general at New York? ”

“ The prevalence of the custom is due to the fact that most men will wait
to be asked to pay a debt. If a draft is a time draft it is accepted by
the person on whom it is drawn by writing his name and date across the
face. This makes it practically a note, to be paid at maturity.
Notes or drafts that you desire to have collected for you by your bank
should be left at the bank several days before they are due, so as to
give ample time to notify the payers.
Borrowing.
Banks are always willing to loan their funds to responsible persons
within reasonable limits. That is what they exist for. ”

“ A bank here, drawing and selling such drafts against a credit to be established abroad by others, pledges its own credit to the payee and is secured against loss and the dishonor of its drafts only in so far as it may insure the creation of the appropriate credit and retain the benefit of it once it is created. The stipulation that the bankrupts should promptly set apart a credit for that purpose upon receipt of advice of the draft and advise the drawee of it was a material inducement to petitioner to pledge its own credit by the sale of its draft. ”

“ The maturity of a draft reading so many days, or months, after date must be calculated from the date of the draft itself. But the maturity of a draft reading so many days, or months, after sight must be calculated from the date it was presented to the sight of the payer and accepted. It is very necessary to date acceptances of time drafts reading "after sight."
Demand for payment must be made at the proper place during business hours. A check of course is payable at the bank on which it is drawn, during banking hours. A draft on a firm is payable at its office ”

“ The fourth includes the cost of the piece of stamped paper on which the account itself appears, as well as the cost of the stamp for re-draft, as it is ingeniously named, viz., the banker’s draft upon his colleague in Paris.
The fifth is a charge for postage and the legal interest due upon the amount for the time that it may happen to be absent from the banker’s strong box.
The final item, the exchange, is the object for which the bank exists, which is to say, for the transmission of sums of money from one place to another. ”

“ He has no right to assume and act on the assumption that the vendee's term of credit must expire before he can have the goods, and that he is bound to accept the draft, thus making himself absolutely responsible for the sum named therein, and relying upon the vendor's engagement to deliver at a future time. ”

“ As it was found impossible to raise the means to pay this draft, it was protested and returned unpaid, and you must make some provisions for its payment when it gets back. I do trust that before that date you will have plenty of means to do so. I would now again repeat that I have made every effort possible to raise the money here and have failed, and I have advanced all I can possibly do, and the other directors have done the same ”

“ We have advice of your draft for one thousand dollars. To protect your credit, we shall pay it; but we beg you will draw no more, till you forward bills of lading.
'You are now overdrawn some five thousand dollars, which, by the maturing of your drafts, has become a cash advance. The death of our senior, Mr. Randall, and the consequent withdrawal of his capital, has left us with an extended business and limited means. Money, also, is very tight, and we therefore earnestly beg you to put us in funds at the earliest possible moment.' ”

“ Tinged You must leave margin to cover shortage and misgrading. Tinkered Your draft excessive. Deposit ____ dollars to our credit, have Bank wire us and we will honor your draft. Tinkering Please remit to our New York house for our credit ____ dollars. Tinsmith Your draft seems excessive, wire weights at once. Tinware Do not draw to exceed ____ cents per bu. on wheat. Tippet Do not draw to exceed ____ cents per bu. on corn. Tippling Do not draw to exceed ____ cents per bu. on oats. Tireless Do not draw to exceed ____ cents per bu. on ____ Tiresome Draft with bill of lading when loaded. ”

“ Being every where better than or equal to specie, he will retain the drafts, and carry them with him to his home, and use them in his business. What I have supposed likely to be done by one, will be done by every creditor of the government. These drafts, to a considerable extent, will remain out, enter the general circulation, and compose a part of the common currency of the country, commanding, at particular places, as notes of the bank of the United States have done, and now do, a premium, but any where being certainly good for the amount on their face. ”

“ One who drafts a plan of your house, and plans a draft of your money. ”

“ Do gentlemen appreciate the full import and meaning of that clause? Do they realize the full extent to which it will carry them? Every contract for the purchase of money is in legal contemplation a contract for the payment of gold and silver coin. Every promissory note, every bill of exchange, every lease reserving rent, every loan of money reserving interest, every bond issued by this government, is a contract to which the faith of the obligor is pledged, that the amount, whether rent, interest, or principal, shall be paid in the gold and silver coin of the country. ”

“ To make a note solvent, and suitable for circulation as money, it is only necessary that it should be made payable in coin on demand, and be issued by a person, or persons, who are known to have in their hands abundant material property, that can be taken by law, and applied to the payment of the note, with all costs and damages for non-payment on demand.
Theoretically, I repeat, all the material property in the country, that can be taken by law, and applied to the payment of debt can be used as banking capital; and be represented by promissory notes, made payable in coin on demand. ”

“ The drafts, being payable at future times, the mere acceptance of them by Miles, did not establish any such fact; for it is a known and ordinary course of business for such acceptances to be made, not only when the acceptor has funds in his hands, but also when funds are expected to be received by him before the maturity of the drafts; and indeed often, for the accommodation of the drawers when the acceptor, being a commission merchant, has the property on hand, out of the sales of which he expects to reimburse himself for the advance. ”

“ Payments, Bonds, and Exchanges.—All tradesmen, alike French and foreigners, might agree in their contracts for payment of goods sold in the fair—to be paid in gold and silver current at the time of making the contract, notwithstanding any ordinance concerning money to the contrary. Interest for loans, and goods sold on credit at fairs, might not exceed fifteen per cent. ”

“ In a building and loan association the money is put up at auction, usually in open meeting on the night or at the time of the payment of dues. Those who wish to borrow bid a premium above the regular rate of interest charged, and the one who bids the highest premium is awarded the loan. The man who wishes to build his house, therefore, and desires to borrow $1,000, must have five shares of stock in his association, must bid the highest premium, and then the $1,000 will be loaned to him. ”