DRAFT ON DEMAND. A person who wishes to remit money to someone in an other place may, if he does not send his own cheque, obtain from his banker a draft on demand payable to the person who is to be paid the money. A banker's draft is a document drawn by one banker upon an other. It may be drawn upon the banker's London office or London agents, or upon one of the banker's own branches, or upon some other bank where an arrangement exists for drafts to be drawn. Whenever a draft is drawn, an advice is despatched the same day, advising the London agents, bank or branch, as the case may be, of the particulars of the draft, so that the banker on whom it is drawn may recognise the draft when it is presented.
A draft on demand, like a cheque, requires a penny stamp. A draft drawn by any banker in the United Kingdom upon any other banker in the United Kingdom, not payable to bearer or to order, and used solely for the purpose of settling or clearing any account between such bankers is exempt from stamp duty. (See Exemption 2, under BILL OF EXCHANGE.) A draft on demand drawn by one branch upon another branch or upon the head office is not a cheque within the meaning of the Bills of Exchange Act, 1882, as it is not addressed by one person to a hanker, which is part of the definition of a cheque. It can not, therefore, be crossed like a cheque. In paying a draft on demand the banker is protected against a forged indorsement by Section 19 of the Stamp Act, 1S53, which is as follows.— Provided always, that any draft or order drawn upon a hanker for a sum of money payable to order on demand which shall, when presented for payment, purport to be indorsed by the person to whom the same shall be drawn payable, shall be a sufficient authority to such banker to pay the amount of such draft or order to the bearer thereof ; and it shall not be incumbent on such banker to prove that such indorsement, or any subsequent indorsement, was made by or under the direction or authority of the person to whom the said draft or order was or is made payable, either by the drawer or any indorser thereof."
It is considered by some authorities that this Section protects a banker in paying not only drafts drawn by one branch on another or on the head office, but also drafts drawn abroad on the head office in England.
In the case of a draft after date, however, a forged or unauthorised signature is wholly inoperative and no right can be acquired through or under that signature (Section 24 Bills of Exchange Act, 1882).
In the judgment of Lord Lindley in Capital and Counties Rank v. Gordon (1903, A .C. 240), speaking of drafts there are the following words : " The first question which has to be considered is whether these instruments are bills of exchange as defined in Section 3 of the Bills of Exchange Act. If they are, then, not being crossed, Section 82 will have no application to them, even if that Section could have applied in this case to such docu ments if crossed. But if these drafts are bills of exchange within the meaning of Section 3, they will come within Section 60 and the bank will he protected by it, for these cheques are drawn on the bank sought to be made liable for paying them. But I agree with the Court of Appeal in thinking that the bank, which is both drawer and drawee of these instruments, is not entitled to treat them as bills of exchange as defined in Section 3 of the Bills of Exchange Act, although a holder may sue the bank upon them and treat them either as bills of ex change or as promissory notes (see Section 5, s.s. 2). An instrument on which no action can be brought by the drawer can hardly be a bill of exchange within Section 3 of the Act, whatever it may be called in ordinary talk." (See DRAFT AFTER DATE.)