Legal Definitions - drawee bank

The drawee bank is the financial institution that is ordered to pay a specific sum of money from a customer's account, typically when a check is presented. It is the bank on which a check is "drawn," meaning it holds the funds of the person or entity who wrote the check (known as the "drawer") and is instructed to transfer those funds to the person or entity receiving the check (the "payee"). This bank is responsible for verifying the check and processing the payment from the drawer's account.

• Example 1: Personal Rent Payment

  Sarah writes a check from her checking account at Midtown Bank to pay her monthly rent to her landlord, Mr. Chen. When Mr. Chen deposits the check into his own bank account, Midtown Bank is the institution that is instructed to release the funds from Sarah's account.

  In this scenario, Midtown Bank is the drawee bank because it is the bank holding Sarah's funds and is ordered to pay Mr. Chen according to the check Sarah wrote.

• Example 2: Business Payroll

  Acme Corporation issues a payroll check to its employee, Lisa, for her bi-weekly salary. Acme Corporation maintains its business checking account at First National Bank. When Lisa deposits her paycheck, First National Bank is the institution that must honor the payment from Acme Corporation's account.

  Here, First National Bank is the drawee bank because it is the bank on which Acme Corporation's payroll check is drawn, and it is responsible for paying Lisa from the company's funds.

• Example 3: Utility Bill Payment

  David writes a check from his account at Community Credit Union to pay his quarterly water bill to City Water Department. The City Water Department then processes the check for payment.

  Community Credit Union acts as the drawee bank in this situation because David's check instructs it to transfer funds from his account to the City Water Department.