A sight draft is kind of a contract or agreement similar to time note or promissory demand notice but this draft is mainly used in import and export trading. You can also say that a sight draft is a promissory demand note in which a person agrees to pay to another person i.e. creditor when he demands for it or when the note expires or reaches the deadline. The sight draft allows an exporter to delay the shipment of an order until the importer deposits the payment to the exporter. Just like a demand promissory note, the importer signs the sight draft and agrees that whenever the exporter demands, the importer will make the deposit of the full payment either before the order is delivered or after the importer receives the delivery.
Brief description of the Sight Draft:
When an individual or a company gets loan from a bank, the debtor signs a legal contract with the bank known as the loan agreement. This agreement allows the debtor to arrange for the repayment of the loan until the deadline arrives where this document also benefits the bank as insurance of the repayment of the loan. In other situations, when there is no bank or loan firm is involved and individuals involve in a loan deal by them, they don’t need to sign a loan agreement but they can also use a promissory note. It depends on each deal and individuals if they want to use a promissory note or a demand promissory note. A sight draft also works like a promissory or demand promissory note. This means that when an importer and exporter sign a sight draft to legalize and insure a deal, they agree on specific terms and conditions of the payment included in the draft.
There are many benefits of using sight draft and both the importer and exporter can benefit from this draft. For example, by using the draft, the exporter can delay or stop the shipment and make sure that first the importer makes the deposit for the order and then the exporter delivers the shipment. This way we can say that a sight draft works just like a promissory or demand promissory note in which the importer is legally obligated to make the payment for the order whenever the exporter demands for it. On the other hand, this document also allows the exporter to check for any errors mistakes in the documents i.e. difference in items of the shipment or their prices before the order is shipped to the importer.
Key elements to include in the Sight Draft:
- Name of the importer with company name and complete address
- Name of the exporter with company name and complete address
- Details of the agreement of import/export signed between two parties
- Details of the shipment that are required to be made by the exporter
- Payment details along with dates and periodic installments
- Deadline for the importer to make the payment for the import
- Terms and conditions of the sight draft
- Validation, expiration and termination of the sight draft
- Signature of both parties
Free Sight Draft Template
Here is preview of a Free Sight Draft Template created as fill-able PDF Form,
Here is download link for this Sample Sight Draft,