Legal Definitions - time draft

Definition: A time draft is a written order signed by one person (the drawer) directing another person (the drawee or payor) to pay a certain sum of money on a specified date to a third person (the payee) or to bearer.

Example: A company in the United States sells goods to a company in Japan and sends a time draft to the Japanese company's bank. The time draft instructs the bank to pay the amount specified on a specific date to the U.S. company or to the bearer of the draft.

This example illustrates how a time draft is used in international trade to ensure payment at a future date.

Other types of drafts:

• Sight draft: A draft that is payable on demand or on proper presentment to the drawer.
• Documentary draft: A payment demand conditioned on the presentation of a document, such as a document of title, invoice, certificate, or notice of default.
• Foreign draft: A draft drawn in one country or state but payable in another.
• Inland draft: A draft drawn and payable in the same state or country.

Note: A check is the most common example of a draft.