Parties to a Bill of Exchange

Every bill of exchange, at the time it is drawn, involves three parties — though, as explained below, two of these roles can be filled by the same person.

1. Drawer. The person who draws (writes and signs) the bill, ordering another person to pay a certain sum of money. The drawer is the person to whom the money is owed — typically the seller of goods on credit. In the drawer's books, an accepted bill is recorded as a Bills Receivable.

2. Drawee. The person directed to pay the amount of the bill — typically the buyer of goods on credit, i.e. the debtor. The drawee's liability under the bill becomes legally enforceable only once the drawee formally accepts the bill, usually by signing 'Accepted' across its face with a date. After acceptance, the drawee is called the Acceptor, and records the bill in their own books as a Bills Payable.

3. Payee. The person to whom, or to whose order, the bill amount is to be paid. Most commonly, the drawer and the payee are the same person — the seller draws the bill payable to themselves. Where the drawer instead directs payment to a third person (for example, one of the drawer's own creditors), that third person is the payee.

Acceptance is precisely the feature that makes a bill of exchange different from a mere instruction — until the drawee accepts it, the bill creates no legal liability on the drawee at all; it is only a proposal. Once accepted, the drawee (now the acceptor) becomes the party primarily liable to pay the bill amount on the due date. …