A bill of exchange differs from an ordinary debt note by its strict formal requirements: if mandatory details are missing, the document loses its status as a bill of exchange. The obligation is unconditional—the payer cannot reference non-performance of the underlying transaction for which the bill was issued.
A promissory note contains an obligation by the issuer to pay, while a draft proposes payment to a third party. A bill of exchange can be transferred to another holder through an endorsement, and typically previous holders remain jointly liable for it.
Historically, bills of exchange were used as instruments for settlements and trade credit between companies. For individual investors, this is not a portfolio instrument: bills of exchange are not traded on exchanges, they are difficult to sell, and reliability depends entirely on the solvency of the specific obligor. Offers to purchase bills of exchange with high yields should be evaluated with particular caution.