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LSDefine
Simple English definitions for legal terms
documentary draft
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A quick definition of documentary draft:
A documentary draft is a written order that tells someone to pay a certain amount of money to another person or to a group. It can be used for things like buying goods or paying bills. The person who writes the order is called the drawer, and the person who has to pay is called the drawee. The order can be conditional, which means it only gets paid if certain documents are presented. There are different types of drafts, like a sight draft that gets paid right away or a time draft that has a specific payment date. Sometimes, people use the word "draft" to talk about when the government makes people join the military.A more thorough explanation:
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.