Drawer, Drawee, and Payee meaning in Bill of Exchange

Drawer, Drawee, and Payee MeaningMany people get confused when it comes to understand the three terms drawer, drawee, and payee. These three terms are used in Bill of Exchange. In this article, I will explain the drawer meaning, drawee meaning, and payee meaning with example. Before that, let me provide you the literary definition of drawer, drawee, and payee

Drawer meaning:

The person who draws the bill is called the drawer. He gives the order to pay money to the third party.




Drawee meaning:

The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is addressed and who is ordered to pay. He becomes an acceptor when he indicates his willingness to pay the bill.

Payee meaning:

The party in whose favor the bill is drawn or is payable is called the payee.

The parties need not all be distinct persons. Thus, the drawer may draw on himself payable to his own order.

Now, let me explain these three terms with example.

Drawer, Drawee, and Payee meaning in Bill of Exchange: Example



Suppose, you are working in a Company. At the end of month, Company pays you salary through Cheque. You go to bank to encash cheque. Bank will deduct money from company’s bank account and will deposit to your bank account. Here you see that your company directed bank to deduct money from its bank account and deposit to your bank account. Here, Bank is “Drawee”, your company which issued cheque is “Drawer”, and you, who receive money through bank, is Payee. In other way, the person/company from whose account money is drawn is known as drawer, the bank who is facilitating withdrawal of money from person/company account is known as drawee, and the person who is paid money is known as payee.

Summary:

                Company ——– Drawer

                Bank ——– Drawee

                You ——– Payee

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