Also known as: drawees · payor bank · acceptor
Written by attorneys · grounded in primary & secondary sources — see below
A person or entity ordered in a draft to make payment. The designation identifies the party responsible for honoring the instrument upon proper presentment.
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Derek Douglas issues a check to Diamond Manufacturing for equipment purchased on credit. The instrument lists Derek's bank as the party required to pay the stated amount upon presentment. When Diamond presents the check, the bank must decide whether to honor the order and debit Derek's account.
Toyson Burruss draws a check payable to the order of a holder. The holder presents the check directly at a branch of Bank of America, the bank named on the face of the instrument. Bank of America examines the account and decides whether to pay cash or return the item unpaid.
The UCC defines the drawee as the person ordered in a draft to make payment. This designation fixes the party that must decide whether to honor the instrument when it is presented.
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If a draft names a nonbank drawee and it is unclear whether a bank named in the draft is a co-drawee or a collecting bank, the bank is treated as a collecting bank. This rule prevents confusion about collection responsibilities.
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A drawee bank that pays a check bearing a forged endorsement may face conversion claims from the true owner. The bank must verify endorsements before charging the drawer's account.
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