A draft, sometimes called a bill exchange (B/E), is the instrument normally used in international commerce to effect payment. A draft is simply an order written by an exporter (seller) instructing an importer (buyer) or its agent to pay a specified amount of money at a specified time. Thus it is the exporter’s formal demand for payment from the importer.
Definition Two:
Bill of Exchange is defined by the Bills of Exchange Act as:
“An unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of, a specified person, or to bearer”.
A bill is signed by the drawer and addressed to a drawee, who becomes the acceptor by writing his name across the face of the bill. The person to whom the bill is payable is referred to as the payee.
A Bill of Exchange is a negotiable instrument.
Drafts are two types: sight drats and time drafts. A sight draft is payable on presentatiopnto the drawee; the drawee must pay at once or dishonor the draft. And atime draft, also called a usance draft, allows a delay inpayment.