A three-party negotiable instrument which represents an unconditional, written order issued by a natural or legal person (the drawer) instructing the recipient (the drawee) to pay a preset amount of money to a third-party (the payee) at a fixed future date or on demand. In this sense, a bill of exchange is similar to a promissory note since payment can be stipulated to take place either on demand or at a fixed date. However, a bill of exchange, unlike a note, is void of any promise or pledge to pay. The legal structure of a bill of exchange resembles that of a check, but a check is typically drawn on a bank, which stands ready to pay its amount upon presentation by a payee. The term “draft” may also be alternatively used, in different contexts, to refer to a bill of exchange.

In most countries, bills of exchange are used for extending credit to buyers who usually endorse them by acceptance, i.e. writing “accepted” on the face thereof. As such, the acceptor undertakes to pay the amount stated in the bill of exchange at maturity or when instructed.