An unconditional order in writing, signed by a person (drawer) such as a buyer, and addressed to other person (drawee), typically a bank, ordering the drawee to pay a stated sum of money to yet another person (payee), often a seller. A draft, also called a bill of exchange, may be payable to a named person or his order (order draft), or to bearer (bearer draft). The most common versions of a draft are sight draft, which is payable on presentation or demand, and the time draft, which is payable at a future fixed (specific) or determinable (30, 60, 90 days, etc.) date. Should the beneficiary under a time draft require the money before the bill matures, he may discount his claim for immediate payment with his bank. Also called bill of exchange.

Related entries