What distinguishes drafts from other payment agreements?

Drafts are distinguished from other payment agreements primarily because they involve a third party in the payment process. When a draft is created, one party (the drawer) orders a second party (the drawee) to pay a specified amount to a third party (the payee). This three-party involvement is what sets drafts apart from other payment methods that may involve direct payment between just two parties.

In various business contexts, especially in trade and finance, drafts serve as a way to ensure security and facilitate transactions. For instance, when goods are shipped, the seller may draw a draft on the buyer's bank, requiring the bank to pay the seller upon presentation of the draft. This structure allows for reliability and formalizes the payment process in a way that two-party agreements do not typically encompass.

The other options address characteristics that do not align with the unique nature of drafts. For example, drafts can be negotiable, meaning they can be transferred to other parties, and they are not limited to international trade, as they can also be used in domestic transactions. Additionally, they do not require upfront payment but can stipulate payment at a future date or upon certain conditions being met.