What is the difference between Bank Contracts and Documents against Payments ?

As far as my knowledge is concerned, Bank Contracts refer with the Consignee who contact their bank to issue duly endorsed Bank contract in favor of shipper to dispatch the shipment and bank will pay their invoice amount. However, in Documents Against Payment (|DAP) shipper is bound to dispatch shipment and submit their documents in consignee bank for claiming payment, but bank has no responsibility whether the invoice will paid or not, if yes, what will be the due date because bank role is just defined as post office to receive documents and intimate consignee to collect it after payment else it will be returned back to shipper.

Question is not very clear.  However as I understand. Bank Contracts are the conditions banks stipulate in their letters of credits issued in favour of the sellers  based on buyers and sellters mutual contracts.These conditions become contract covering the transaction (shipment by sellers, and payments by buyers).  These conditions require the documents to be presented to bank by the seller after shipment fulfilling the conditions, also stipulate the how and when payment will be effected by the bank.  If payable at sight, bank will pay at sight upon presentation of documents if complying documents are presented.  If the letter of credit is payable at a deffer date then bank will make an undertaking to at deferred date and release payment at due date.

Doc against Payment:

Based on mutual contracts between Seller and Buyers Seller ships goods to Buyers and submits the related shipping documents to Buyers bank with instruction to deliver the doucments to Buyers 'against payment'.  This payment can be at sight, as well as, at a deferred date depending upon the mutual contracts between Sellers and Buyers.  Bank is not involved in any way in this transaction except acting as a post officer.

Hope I have been able to explain it to your sataction.

Mokhtar

One of the primary peculiarities of the documentary credit is that the payment obligation is independent from the underlying contract of sale or any other contract in the transaction. Thus the bank’s obligation is defined by the terms of the LC alone, and the sale contract is irrelevant. The defenses available to the buyer arising out of the sale contract do not concern the bank and in no way affect its liability. The “principle of strict compliance” also aims to make the bank’s duty of effecting payment against documents easy, efficient and quick. Hence, if the documents tendered under the credit deviate from the language of the credit the bank is entitled to withhold payment, even if the deviation is purely terminological.

Bank contracts/guarantees on the other hand the liability occurs in the event of non-performance of contractual obligations by the buyer and seller or as per the terms of guarantee for performance.

Thanks for Valuable contribution by the eXperts