MR. BANKER: If you will allow me, I will try and explain and tell you what these various terms mean, and what use we make of these several instruments in writing.
_First_: A Promissory Note is a written promise to pay some one a sum of money. It may be either to pay it immediately, or on demand, or at some future day; to pay it either with or without interest; or to pay it at some particular place.
MR. MERCHANT: It is just a written acknowledgment of a debt, isn't it?
MR. BANKER: It is a written acknowledgment of a debt, coupled with a promise to pay it. If A owes B $1,000, and gives his note for that amount, and B sells the note to C, the note has become exchange. It is not the usual form of what is called exchange, but is nevertheless just as truly exchange; for suppose that C owes A $1,000, he can then cancel the debt by delivering him the note for $1,000. C has paid his debt to A with A's debt to B.
_Second_: A check is a written order on a bank to pay money on demand. It may be drawn to cash, or it may be drawn to bearer, or it may be drawn to the order of some one. If A owes B $1,000 and A has a deposit at a bank for that amount, A can cancel his debt to B by giving him a check on the bank for $1,000. The check is exchange, though not in the usual form of what is known as exchange, for A has canceled his debt to B by giving B the bank's debt to him.
_Third_: A draft is a written order from one person to another to pay a third person a sum of money.
An acceptance is to write across the face of a draft, payable at a future time, the word "accepted," and the signature of the person accepting it.
If A is owing B $1,000 and C is owing A $1,000, the debt to B can be paid by A's draft upon C. The draft is identical in every respect with the check, the difference is in form only, and the use of them. A check is only used when the order to pay money is upon a bank. A draft may be, and often is used when the order to pay money is upon a bank. A check, properly or correctly speaking, is never used in an order to pay money upon an individual or corporation, but a draft is invariably used in such cases.
The transactions are identical in effect, though the conditions, or circumstances, are different. Both the check and the draft are exchange.