Future Business Leaders of America (FBLA) Business Law Practice Exam

What is the term for the person to whom an order is given to pay money in a draft?

1. Payee

2. Drawee

3. Drawer

4. Endorser

The correct answer is: Drawee

The correct term for the person to whom an order is given to pay money in a draft is the drawee. The drawee is the individual or entity that is instructed to pay a certain amount of money when presented with the draft. In a typical financial transaction involving a draft, the drawer—who creates the draft—issues an order to the drawee. For instance, in the case of a check, the bank is the drawee because it is the institution that will pay the funds to the payee when the check is presented. The payee, on the other hand, is the person or entity that is to receive the payment. This distinction is important; while both drawee and payee are involved in the transaction, the drawee specifically refers to the party that holds the obligation to make the payment as per the draft's instructions. The other roles mentioned—drawer and endorser—serve different functions in the payment process. The drawer is the person who writes and signs the draft, while the endorser is someone who signs over their right to the payment to another party. Understanding these roles clarifies the flow of payment in commercial transactions.