What it is:
How it works (Example):
An example of a payee in a check is one whose name appears in the caption "Pay to the Order of" on most checks.
Why it Matters:
The payee is the one with legal rights to a payment. It is therefore essential to decipher who the individual or entity is that is to receive payment in any financial transaction. In any contract of a financial transaction where it is unclear who the payee and payer are, the contract may be invalid or there may be provisions within the law about how to determine rights in such situations.