Legal Definitions - documentary draft

A documentary draft is a type of payment demand that is conditioned on the presentation of a specific document, such as an invoice, certificate, or notice of default. It is an unconditional written order signed by one person (the drawer) directing another person (the drawee or payor) to pay a certain sum of money on demand or at a definite time to a third person (the payee) or to bearer.

For example, if a company orders goods from another country, the seller may require a documentary draft to ensure payment. The seller will not release the goods until the buyer presents the required documents and pays the specified amount.

Another example is a letter of credit, which is a type of documentary draft used in international trade. A bank issues a letter of credit on behalf of the buyer, guaranteeing payment to the seller once the required documents are presented.

Overall, a documentary draft is a payment method that provides security for both the buyer and seller by ensuring that payment is made only when the required documents are presented.