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What Does "Drawee" Mean?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 19 March 2014
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A drawee is a person or entity who is directed to pay a bill of exchange when it is presented by the payee. The person who writes out said document is said to be the drawer or maker. The classic example of a bill of exchange is a check. The person who writes the check is the drawer, the person to whom the check is made out is the payee, and the bank named on the check is the drawee. The payee can enter the bank, present the check, and request the funds enumerated on the check.

Banks are not the only entities which can be drawees, although they are among the most common. A person can also be his or her own drawee, as for example when someone writes an I.O.U. to a friend indicating that when the note is presented, he or she will repay the debt. Bills of exchange, also known as drafts, are not necessarily limited to checks either.

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When a drawee is presented with a bill of exchange, the drawee does have the right to examine it to confirm that it is genuine. If the document does not look genuine or is not filled out properly, the drawee may refuse to honor it, in which case the payee will have to return to the drawer to obtain the funds. Likewise, drawees do not extend credit without prior arrangement and can return a bill of exchange without paying on the grounds that the drawer has insufficient funds to pay it or is not authorized to write the draft.

Someone cannot be made a drawee against his or her will. For example, Jack cannot write out a draft naming Jane as a drawee if they do not have a previously agreed upon legal arrangement which allows people to collect funds from Jane. Likewise, people also cannot be made responsible for debts they do not incur.

People who need to access cash in a bank account may opt to make out a check to “cash,” with the bank paying the draft to whoever presents it. This tactic is sometimes used by people such as parents who do not want their children to have full access to a bank account, but do want to allow their children to withdraw cash in a specific situation. Likewise, a business owner who cannot leave the business can send an employee to get cash from the bank with a “cash” draft.

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wizup
Post 2

@goldensky - That's a shame what happened to your neighbor. Unfortunately these types of scams happen all the time all over the world.

With today's technology anyone can print up a check that looks like a negotiable instrument but that doesn't mean the money is there to back it up.

Even bank tellers have a difficult time in determining if they're dealing with a counterfeit check or not. They might be able to confirm that the check is drawn against a legitimate bank with a real account number, but the actual check itself may not be real.

goldensky
Post 1

My neighbor received a letter in the mail a while back from a market research company requesting that she become a secret shopper for them.

They sent her a check in the amount of $3,400.00 that looked legitimate to her so she deposited it. The letter stated that she had to wire the money back to them to cover expenses.

After her check had cleared then the drawee bank wrote out the MoneyGram and wired the funds. A few days later she received a notice from her bank that that check had bounced and she was responsible for paying back the $3,400.00.

I just don't understand how these companies are allowed to operate this way by preying on poor innocent people like my neighbor.

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