Also known as: drawee banks · payor bank · drawee
Written by attorneys — see sources below.
A bank ordered in a draft to make payment. The drawee bank becomes liable on the instrument only upon acceptance and may charge the drawer's account when payment occurs in good faith.
Denise Donovan writes a check from her business account at Dominion Capital payable to a supplier. Dominion Capital receives the item and debits Donovan's account after verifying the signature and available funds. The supplier then presents the check to Dominion Capital for payment.
Diego Duarte receives a check payable to his company but an employee forges the endorsement and deposits it at another bank. The depositary bank presents the item to the drawee bank, which pays without detecting the forgery. The drawee bank then faces a conversion claim from the true owner and must decide whether to pursue warranty claims against prior parties.
Open the case page for the full write-up.
View caseThe drawer is the person who signs or is identified in the draft as ordering payment. The drawee bank is the person ordered to make that payment.
Supporting sources
A drawee bank is not liable on the instrument until it accepts the draft. Payment alone does not create liability to the holder unless acceptance has occurred.
Supporting sources
The drawee bank may bear the loss if it pays on a forged endorsement because it is in the best position to detect certain forgeries, though it can often shift the loss upstream through presentment warranties.
Supporting sources