What is a draft?

parties.

193. QUESTIONS

Illustrate its use with three parties. With four

What is the theory of a draft? What is an acceptance? When necessary and when not?

Name the parties to a draft and state the liability of each.

What is an acceptance for honor? Compare the liability of such an acceptance with that of a regular acceptor.

Illustrate several somewhat irregular acceptances. May an acceptance be on a separate sheet of paper? May it be given before the draft is drawn?

Explain a set of exchange. Why not so frequently used now? What care must be exercised in their use?

Explain holder's duties as to how, when, and where to present for acceptance.

What is non-acceptance or non-payment? And what must be done by the holder?

What is a protest? And when necessary? What is notice? And how given?

1. In H v. B, 75 S. E. 696 (S. C.), a bank held liable for negligence of its correspondent in the collection of a draft. A stipulation on a deposit slip held not to exempt a bank from liability for its negligence in the collection of a draft or waive the rights of the depositor under the law merchant.

2. A bank sued for negligence in the collection of a draft held to have the burden of showing the taking of steps necessary to fix the indorser's liability.

3. In P v. T, 76 S. E. 153 (Ga.), written agreement to accept a bill of exchange to be drawn in the future is valid, if the bill is drawn in accordance with the agreement, and within a reasonable time, in favor of the person who received it for a valuable consideration.

195. Introduction. The business man deposits his money with a bank for several reasons. It is a safe place to keep it, he may receive interest on the deposit or on a part of it, it is ready for him at any time, and by means of an order on the bank the money or any part of it may be transferred to another person.

The right to draw is based on the fact that credit is presumably obtained at the bank by becoming a depositor. To become a depositor, an introduction to the bank is usually obtained and the funds one desires to deposit are listed on a deposit slip and passed in to the teller, who enters the amount in a pass-book which the depositor keeps as a receipt for his deposit. A credit is now established, also the right to issue checks against the amount deposited. As checks are presented and paid by the

banker they are at once charged against the depositor's account. These checks are also stamped "paid," and at stated intervals the account is written up and cancelled checks are returned to the depositor bearing the payee's indorsement, thus becoming receipts. Two general methods of depositing are recognized; one, a commercial account against which checks may be drawn, and one, a savings account against which checks are not to be drawn. In the first, money is withdrawn by means of a check, and in the second, by presenting the pass-book and having the amount withdrawn entered.

196. Definition. A check is a written order by a depositor on his banker to pay a certain sum of money to another. There are three necessary parties to a check, the maker called "drawer” (who is the depositor), the drawee, or banker, and the payee (the one to whom the check is made payable). The drawer may also be the payee.

BANK CHECK

May of 1913 No 675– Commercial National Bank (*)

A check is subject to the usual requirements of negotiable paper; it is an order, it must be drawn on a bank or banker, it purports to be drawn against a deposit, it must designate a payee, it must be for the payment of a certain sum of money, it is not entitled to days of grace, and it should be dated.

In the above check W. A. Evans is drawer, E. F. Patch the payee, and the Commercial National Bank is the drawee.

The lettered number is a key number used by bankers to assist in detecting forgery. On the issuing of blank checks to a depositor the latter's receipt for them is taken. Thereafter, if a teller should become suspicious of a depositor's signature he would compare with the depositor's receipt for blank checks to see if such a key-numbered check had been issued to this depositor. If no such receipt is found, the signature is probably a forgery.

1. Use. The check is one of the chief instruments of payment; it affords ready means of transferring money from one account to another. The check is intended for immediate use. If a check is payable to bearer, no indorsement is necessary, although an indorsement is usually demanded more as a means of furnishing evidence than of holding the indorser liable. If a check is payable to order, bankers may require an identification and indorsement before payment.

2. Post-Dated or Ante-Dated. It is not material whether the check bears the present date, is post-dated, or is ante-dated. Post-dating is an everyday occurrence among business men. If the bank pays before the date named it does so at its peril.

3. Parties. Like a draft, a check has three parties: drawer, or depositor; drawee, or banker; and payee, or holder. The holder has no recourse against the drawer until presentment has been made. It is the duty of the drawer to have funds available for the prompt payment of the check. The holder must be prompt in presenting the check for payment, and must notify the drawer in case payment is refused so that the drawer may protect himself.

197. When To Be Presented. Since checks are not for circulation, they must be presented to the bank within a reasonable time, but circumstances alter cases. If the bank is in another city, then more time for presentation must be granted; the check must not be locked up, however. It must be started towards its destination, the bank, generally within twenty-four hours after its receipt. If all parties live in the same town, the check should be in the bank the following day or the drawer will be released

so far as any loss may be concerned. If a check is put in circulation and more time is thereby consumed than the law allows the holder, the drawer is released, but not so as to the immediate indorser.

The above must not be construed so as to release the drawer of the check in case the delay does not injure him. Thus a check might not be presented for a year. This of itself would be no cause for releasing the drawer. The delay must work an injury to effect a release.

198. Certification. Checks are not intended for extended circulation as are bills of exchange, yet business demands require this to some degree. If the banker signifies his willingness to do so a certification may be given, and then the check may be circulated subject only to the Statute of Limitations. The banker

is therefore absolutely liable for the payment. Certification somewhat resembles an acceptance, but while there are some similar points, there are several points of difference. In the acceptance of a draft the drawee becomes absolutely liable, and the drawer remains conditionally liable. In the certification of a check the bank or banker becomes absolutely liable, while the drawer may or may not continue conditionally liable. First, if the certification of the check is at the solicitation of the drawer, then he continues liable; but if the request is made by the holder, the drawer is