Book Opener

a draft is an instrument in which one party(the drawer ) orders another party (thedrawee ) to pay money to a third party (thepayee).Drawees, although ordered to pay money,are not required to do so unless they haveagreed to the arrangement. They agree to adraft by writing the word accepted on the document(usually on the front) and signing theirname. A drawee who has done this is calledan acceptor and can be required to pay thedraft.Businesses and private parties frequentlyuse drafts to transfer debts from one party toanother. In The Opening Scene, for example,we discover that the $1,000 that Julio owes toDavid is exactly the amount that David andMelanie owe to the furniture store. This situationcan be easily resolved by using a draft.David can draw a draft ordering Julio to paythe $1,000 to the store. If Julio agrees by writingaccepted and signing the face of the draft,he will then be obligated to pay $1,000 to thefurniture dealer, thus paying David andMelanie’s debt.A sight draft is a draft that is payable as soon as it is presented tothe drawee for payment. A time draft is a draft that is not payable untilthe lapse of the particular time period stated on the draft (see Figure 23.3).ChecksA check is a draft drawn on a bank and payable on demand. It isthe most common kind of draft in use today. When issuing a check, youWHOM DO I PAY?In Example 1, Keith signed anote promisingto pay themoney back to Laura’sUsed-Car Exchange. Whymust he pay the money tothe finance company?Figure 23.3$ 500.00 Wilmington Delaware, May 26, 20--In or within 60 days----------------------------------------------------------------- Pay tothe order ofDavid Connors---------------------------------------------------------------Five hundred and 00/100----------------------------------------------------------DollarsValue received and charge the same to account ofTo Walter AhearnNo. 412 Oxford, Maryland }TIME DRAFTA time draft is not payableuntil the lapse of the particulartime period stated onthe draft. What is the legaleffect of the words“Accepted, Walter Ahearn,June 5, 20 – –” on thefront of this draft?Chapter 23: Negotiable Instruments 509