Text 1. DRAFTS
A draft is an unconditional written order by which one party directs a second party to pay to the order of a third party or to the bearer a certain sum of money on demand or at a definite time A draft is also known as a bill of exchange (B/O).
| $ 510. 00 Nashville, Tennessee January 20, 2004 Thirty days after date______________________________________________ Pay to Order of: Morrison G. Chase_________________________________ Five hundred and ten dollars________________________________________ Value received; Charge to Account of To Margaret H. Sandford___________________________________________ # 15 Knoxville, Tennessee__________} Garry A. Minton__________________ |
The usual purpose of a draft is to collect money owed. A draft initially involves three parties the drawer, the drawee, and the payee. The drawer (Garry A. Minton) is the person who executes or draws the draft and orders that payment be made. The drawee (Margaret H. Sandford) is the person directed to pay the draft. The payee (Morrison G. Chase) is the party to whom this commercial paper is made payable.
(Sanford most probably owes Minton $510 as a result of a previous transaction. Therefore Sanford is likely to honor the draft by paying Chase andin that way to pay her debt to Minton.)
Drafts are sometimes described in terms of the time of payment. If the draft is payable at sight or on demand that is, when it is presented to the drawee by the one holding the draft it is a sight draft. The drawee is expected to pay when the draft is presented. If a draft is payable at a specified time, or if it is payable at the end of a specified period after sight or after the date of the draft, it is a time draft, as is illustrated in the example.
When a time draft is payable a number of days or months after sight, it must be presented to the drawee for acceptance in order to start the running of the specified time. Acceptance is the drawee's promise to pay the draft when due. When the draft states it is payable a number of days or months after date, the time starts running immediately from the date of the draft.
Vocabulary
draft , ( ; , . )
promissory note , '
certificate of deposit (COD)
IOU (. I owe you )
bearer 1) , ' 2) ,
on demand
bill of exchange ,
to charge to account
pay to order ( )
to owe 1) , -. 2) -
()
drawer (, )
drawee (, )
payee 1) (); 2) ' /
to execute a document
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to honour the draft ,
payable at sight '
sight draft '
time draft
acceptance 1) (., )
2) ( ' (, ).
3. Read, translate, and analyze text 2; study the texts vocabulary.
Text 2. CHEQUES
A cheque is a special type of draft by which a bank depositor orders the bank to pay money, usually to a third party. Cheques are usually written on special forms provided by bank for a fee. The forms provided by the bank usually are magnetically encoded to make cheque processing easier for the banking system. However, cheques may be written on blank sheets of paper, forms provided by the depositor, or other materials and still be legally effective. The drawee, though, must always be abank for the instrument to qualify as a cheque.
This is an example of acheque:
 PB Progressive Bank & Trust Co.No. 765
Providence, Rhode Island57-7325/2115
Pay to the order of: J ohn B. Wright $ 105.75_
One hundred five dollars and seventy five cents.________________
...................................................................................... Robert. M. Malhon
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Here, Progressive Bank & Trust Co the drawee, John B.Wright is the payee, and
Robert M. Mahlon is the drawer of this cheque.
The bank, according to the contracts with its depositors, agrees to honor (pay when due) each cheque as long as sufficient funds remain in the depositor's account. As a debtor of the depositor, the bank must honor the cheques in return for the right to use the depositor's funds until the depositor demands their return. Of course, the bank must retain a sizable percentage of all funds deposited so that it can pay cheques when they are presented. The remainder of the deposited funds is loaned at interest to pay for the bank's operations and to earn for the bank's owners.
A person, who deliberately issues a cheque with the knowledge that the funds in the account will be insufficient to pay the cheque when it is presented at the drawee bank, is guilty of a crime. The bank will dishonor (refuse to pay when due) the instrument and the payee or current owner of the cheque will not get any money for it from that source. In addition, if a cheque is issued to pay a debt, the payoff is not effective until the cheque is presented to the drawee bank and honored.
When a cheque has been lost or stolen, the drawer should direct the bank not to pay it. Such an instruction is called a stop payment order. Banks usually charge a small fee to stop payment on a cheque. If, by mistake, the drawee bank disregards the stop payment order and pays the cheque, the bank must recredit the account. The bank not the depositor must bear any loss. Oral stop payment orders are good only for two weeks unless they are confirmed in writing. Written stop payment orders are good for six months and lapse at the end of that time unless renewed.
Care must be taken when writing or accepting cheques.
When you write a cheque, be sure not to leave room for someone to insert figures and words to change the amount of the instrument.
Never sign a blank cheque.
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Vocabulary:
| form to provide (with) fee to encode processing blank account to retain sizeable remainder to loan at interest earn a profit deliberately to issue a cheque to dishonor stop payment order payoff effective to disregard to lapse | 1) (for) 2) , , , , , / 1) () 2) ( ) , , 1) 2) , 1) ( ) 2) |
