Q.In a Bill of Exchange, the person who is directed to make the payment is called:

The person who draws (writes and signs) a bill of exchange is called the Drawer.

A bill of exchange normally has three parties:

• Drawer — the person who makes/writes and signs the bill, ordering payment. He is usually the seller/creditor.
• Drawee — the person on whom the bill is drawn and who is ordered to pay. On accepting the bill he becomes the Acceptor. He is usually the buyer/debtor.
• Payee — the person to whom the amount is to be paid (often the drawer himself, or an endorsee).

So the person who draws the bill is the Drawer.

A bill of exchange has three parties — Drawer, Drawee and Payee. A Notary Public is an outside officer who records the fact of dishonour, so he is the odd one out.

Who is who on a bill of exchange

Drawer, Drawee and Payee are the essential parties created the moment a bill is drawn and accepted. The Notary Public enters the picture only if the bill is dishonoured, to provide official evidence of dishonour. Hence he is not a party to the instrument itself.

False. By definition a bill of exchange contains an unconditional order to pay.

As defined in the Negotiable Instruments Act, 1881, a bill of exchange is "an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument."

Key features that make the answer clear:

If the order to pay were made subject to a condition, the document would not be a valid bill of exchange at all. Hence the statement is wrong.

The correct option is Drawee. A bill of exchange is drawn by the creditor (Drawer) upon his debtor; the debtor on whom the bill is drawn, and who is ordered to pay, is the Drawee.

Explanation — parties to a bill

• Drawer — the person who makes/draws the bill (usually the seller/creditor).

• Drawee — the person on whom the bill is drawn and who is directed to pay (the buyer/debtor). This is the answer.

• Acceptor — the drawee after he signs (accepts) the bill, agreeing to pay.

• Payee — the person to whom payment is to be made (often the drawer himself).

The drawer is the maker and signatory of a bill of exchange, and he is the creditor who will receive payment on the due date.

In a bill of exchange there are normally three parties — the drawer, the drawee and the payee. The drawer is the person who prepares, signs and issues the bill, ordering the drawee to pay a certain sum. Because the drawer has sold goods or given value on credit, he stands as the creditor in the transaction.

Bills of exchange in India are governed by the Negotiable Instruments Act, which was passed in 1881.

Ownership of a bill is transferred by the holder through endorsement, not by the drawee, so the statement is false.

The drawee is the person on whom the bill is drawn and who accepts it (the debtor). He is liable to pay the bill; he is not its owner and therefore cannot transfer it. It is the holder of the bill (originally the drawer/payee) who transfers ownership by endorsing and delivering it.