Time drafts are financial drafts with a future payment date, often based on anticipated events. Temporary drafts allow transactions at any time, but cannot be executed before the specified date and require compliance with all provisions. They are used for advance preparations for future payments, with proof of completion required for processing.
Time drafts are financial drafts that carry a payment date set for some specific time in the future. In general, there are specific circumstances or conditions that must be met in order for the draft to be paid. Often the draft is implemented in anticipation that certain events will occur between the date the draft is created and the date the draft is scheduled to run.
The temporary eraser is different from the common visual eraser. With a draft in view, the transaction can be made at any time. All that is required is for the issuer of the draft to initiate the transaction. As long as the draft complies with the general terms and conditions that apply to any type of transaction carried out by a bank or financial institution, the draft at sight will be accepted and processed once submitted.
Conversely, this type of draft cannot be executed before the date specified in the terms of the draft agreement. Additionally, all provisions included in the draft text must be fully complied with before the issuing financial institution executes a temporary draft. For example, if a Letter of Credit is anticipated to be approved before the execution date mentioned in the draft, the approval must take place and be confirmed before the deadline is met.
The temporary draft is sometimes used as a means of making advance preparations to award compensation to a third party that is paid in the future. In situations where payment is conditioned on the completion of specific tasks or projects contracted by a third party, the issuing institution typically requires some form of proof that the project or task has been completed before the draft will be honored and processed. Therefore, the draft is sometimes a useful tool for keeping projects on target for completion, since the recipient of the draft has a vested interest in completing work on time and receiving compensation in a timely manner.
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