An accepted draft is really a promissory note, though it is more often called an acceptance. When a man pays or accepts a draft he is said to honour it. In the foregoing illustration A is not obliged either to pay or to accept the draft. It is not binding upon him any more than a letter would be. He can refuse payment just as easily and as readily as he could decline to pay a collector who calls for payment of a bill. Of course, if a man habitually refuses to honour legitimate drafts it may injure his credit with banks and business houses.
It is a very common thing to collect distant accounts by means of commercial drafts. A debtor is more likely to meet—that is, to pay—a draft than he is to reply to a letter and inclose his cheque. It is really more convenient, and safer, too, for there is some risk in sending personal cheques through the mail. There are some houses that make all their payments by cheques, while there are others which prefer to have their creditors at a distance draw on them for the amounts due.
If a business man who has been accustomed to honour drafts continues for a period to dishonour them, the banks through which the drafts pass naturally conclude that he is unable to meet his liabilities.
Some houses deposit their drafts for collection in their home banks, while others have a custom of sending them direct to some bank in or near the place where the debtor resides. If the place is a very small one the collection is sometimes made through one of the express companies.
When goods are sold for distinct periods of credit, and it is generally understood that maturing accounts are subject to sight drafts, there should be no need of notifying the debtor in advance. Some houses, however, make a general custom of sending notices ten days in advance, stating that a draft will be drawn if cheque is not received in the meantime.
Notice the illustrations. The protest notice at the left of Nos. 1, 2, and 4 is intended for the bank presenting the draft for payment. The reason for this will be fully explained in our lesson on protested paper. (See [Lesson XIII].) No. 2 shows an accepted draft payable to the order of a bank in the city upon which it is drawn. No. 1 is payable to the order of a bank in the city of the drawer. No. 3 is a sight draft payable to the order of a bank and accepted payable at a bank. No. 4 is a time draft payable to "ourselves"—that is, the Pennsylvania Steel Company.