A drawee is an entity obligated to pay the recipient (payee) of a check, draft, or other negotiable instrument. The drawee could be an individual, business, bank, or other organization who issued the payment instrument or owns an account against which the instrument is drawn. In some cases, the drawee is a quasi-bank or other third-party service who provides the service of cashing checks for customers.

The instructions written on a check, draft, or other negotiable instrument direct the drawee on how to process the payment. Checks and drafts instruct the drawee to pay the funds from a specific bank account. When the drawee receives the payment instrument, it processes the payment in accordance with the instructions.

The drawer is the party who writes and signs the check, draft, or other negotiable instrument. The drawee is the party who is obligated to honor the payment if certain criteria is met. This criteria includes the payment instrument being written or signed by a valid individual entitled to issue the order, with sufficient funds in the drawee’s account.

The drawee either honors the payment instrument or they may return the negative instrument to the payee with an explanation of why the payment was not accepted. This opposite process of returning the payment instrument is called dishonoring the instrument. When this happens, the funds from the instrument are returned to the underlying account from which the payment was taken.

In conclusion, a drawee is the party who is obligated to pay funds from a specific bank account in accordance with a negotiable instrument. The drawee processes the payment, with or without additional fees, or may return the instrument to the payee if certain criteria, like sufficient funds, is not met. Payday loan shops that offer check-cashing services, banks and other entities providing payment instruments can all be considered drawees.