Drawer and Drawee

A bill of exchange refers to a written order that is mainly used in international trade. It requires one party to pay a particular amount of money to another party on a specific date or on the demand of the party to be paid. In some countries, the bill of exchange is referred to as draft, and if the money is drawn from a bank, then it is known as a bank draft. There are several parties involved in a bill of exchange. Some of these parties are the drawer, and the drawee and this paper, therefore, seeks to establish the difference between these two parties.

The drawer in a bill of exchange is the party that extends credit by giving another entity permission to borrow money. It refers to the party that pays out the money in this arrangement. Depending on the situation, the drawer can take up two of the positions in the bill of exchange; for instance, the drawer can also be the drawee in the case that the bill is drawn as pay to my order or pay to me. In this situation, the drawer will be the creditor and the one to be paid at the same time.

The drawee, on the other hand, refers to the one that is borrowing money from the drawer. The funds will then be paid out by the drawer to the payee who will act as the intermediary between them and will, in turn, pay out the money to the drawee. This, therefore, means that the drawee is on the receiving end of the bill from the initiation point which is the drawer.

It is thus clear that there are three parties in the bill of exchange which are the drawer, payee, and the drawee and each has different roles in the transaction.

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