Features of a CIF contract

Features of a CIF pin downThe commutation feature of a CIF quail is that it is a shipment recoil. This fact explains about every hireual and legal feature of the contract.Even if the CIF contract was the just standard form of shipping contract, which it is not, it would be very difficult to insure with the above educational activity the contractual and legal features of this contract be explained by its title rather than its industry application.The acronym C.I.F. stands for cost, damages, freight and represents those features which are admitd in the cost-price of the goods to be purchased1. Cost simply pertains to the actual cost of the goods being purchased, redress quite liter all in ally means that the goods will be protected by an insurance policy during their transit and freight refers to the cost of shipping the goods by letter carrier to the final delivery point.The best flair to explain and agnize the contractual and legal features of the C.I.F. contract is by way of an example. Consider the side by side(p)A. Ltd. based in Ireland offers to sell to B. Ltd. based in England 10,000 Kilograms of world power Edward potatoes A-grade congruousty for 2000 C.I.F. Liverpool. B Ltd. fancys the offer in writing. A legally binding contract has thus been formed. Let us instanter examine every stage of the execution of this contract, with picky commission of the respective contractual duties of A. Ltd., the marketer, and B. Ltd. the vendee.Clearly, the first duty of A. Ltd is to withdraw 10,000 Kilos of A-grade quality King Edward potatoes. It may be that A. Ltd. already has this bill of potatoes stocked in ace and only(a) of its warehouses in Ireland. Alternatively, A. Ltd. may know of a carrier which is on its way to Liverpool carrying this quantity of potatoes on board, in which shell, A. Ltd. might choose to purchase them from their topical owner while they are afloat. Alternatively, A. Ltd. may dedicate already dispatched a shi pment of potatoes to Liverpool, in which pillow slip, it may simply choose to assign the appropriate quantity of potatoes to meet B. Ltd.s order.In light of the fact that the contract stipulates both the quantity, namely 10,000 kilos, and the quality, namely A-grade quality King Edward variety potatoes, the seller is under a duty to ensure not only that the goods dispatched/purchased/delegate meet this explanation, but overly that they will continue to meet this comment on delivery in the solecism of Mash Murrell Ltd. v. Joseph I. Emanuel Ltd. 19612 it was held that there is an implied landmark in all C.I.F. shipping contracts that, at the condemnation of shipment, the goods are of a sufficient quality to survive normal transit.A. Ltd., having appropriated the 10,000 kilos of potatoes, mustiness then(prenominal) arrange for these potatoes to be shipped to Liverpool, the destination stipulated in the contract, and it is A. Ltd.s duty to remunerate for the cost of this shi pment, i.e. the freight.In return for this shipment fee, the carrier must forget to A. Ltd. a valid3 Bill of laden. A Bill of Lading is a record which contains the terms of the contract of carriage, as well as a landment that the goods have actually been shipped4. Essentially this roll serves at the title of ownership, i.e. whoever possesses this inscription is entitled to take possession of the goods. In the case of Hansson v. Hamel Horley 1922 A.C. 36, the House of Lords held that once the seller has transferred the Bill of Lading to the buyer, conferred on they buyer are cardinal distinct proficients (a) a right to receive the goods5, and (b) a right once against the shipowner, who carries the goods, should the goods be damaged or not delivered. Regarding the former right, it therefore follows that this document be freely transferable Soproma SpA v Marine Animal By-Products Corp. 1966 1 Lloyds Rep. 367. Regarding the latter right, it therefore follows that the Bill o f Lading, when procured by the seller, in our example A. Ltd., must be an accurate reflection of the state of affairs at the time of shipment. This principle was confirmed by the court of suppli erectt in the case of The Galatia 1980 1 W.L.R. 495. In this case it was held that the Bill of Lading must include a factually accurate statement as to the quality and quantity of goods which have been shipped. Where any quality or quantity is listed as secret on the Bill of Lading, the Court has tended to infer a presumption that the presumed state of the goods is not wildly at betting odds with the quantity or quality in fact loaded6 be not wildly at odds with the quantity in fact loaded.Returning to our example A. Ltd. has thus cold appropriated the cargo of potatoes, has made/procured a contract of carriage, at his own cost, and has acquire a valid Bill of Lading from the carrier, as receipt of shipment. A. Ltd. must now, as part of his final contractual duties, secure an insurance policy, again at his own cost, to protect the potatoes from all usual risks7 which might come to pass during their transit from the point of shipment to delivery at the port of Liverpool8. It is also important that the type of insurance policy secured is fully transferable, i.e. assignable by endorsement under S. 50(3) of the Marine amends Act 19069 after all, after the goods have been delivered to B. Ltd., this company may wish to transfer the goods to a third gear society, who may then need to rely on the insurance cover, should it later(prenominal) transpire that the potatoes were damaged during their voyage at sea.These documents having been obtained, A. Ltd.s final contractual duty is to ensure that these documents are sent and delivered to B. Ltd. I good time, so that they will have them in their possession at the is carry out the carrier delivers the potatoes to Liverpool10.Having discussed the contractual duties of the seller under a C.I.F. contract, let us now turn t o examine the contractual duties of the buyer, B. LtdThe first thing to note is that the buyer does not buy the goods themselves, but rather buys the documents pertaining to the goods, namely the Bills of Lading and the Insurance policy. Thus the buyer, B. Ltd., is under a duty to accept these documents from A Ltd. and founder for them. This duty is not absolute the buyer has a right to decline these documents if they indicate that the cargo has been shipped late (i.e. later than the shipping date stipulated by the contract). This was confirmed by the High Court in the case of Kwei Tek Chao v. British Traders Shippers Ltd. 1954 2 QB 459. Likewise, the buyer has a right to disavow improperly tendered documents In the case of Alkali exportation Corp. v. Fl. Bourgeois 1921 3 K.B. 443, the High Court held that the buyer was indoors his right to reject the documents for they did not contain a valid insurance policy, but rather an insurance certificate.Interestingly, under this conc eption of the C.I.F. contract, the buyer has a duty to pay against the documents steady if he has not yet had a chance to inspect the goods11. This principle was confirmed in the case of Biddell Bros v E Clemens Horst Co. 1911 1 K.B. 214, and was reiterated in the case of Manbre saccharine v. Corn Products 1919 1 K.B. 198, in which it was held that the buyer must pay against the documents even where the goods are damaged upon arrival. Prima facie, this might seem somewhat unfair after all, why should a buyer pay for goods which have arrived in a damaged condition. However, if ace considers the mechanisms operating under the C.I.F. contract, in particular the sellers duty to secure appropriate insurance documents, angiotensin-converting enzyme can see that the interests of the buyer are still protected disregarding of his duty to pay for the documents front to inspection if the goods are faulty, and the Bill of Lading states that the goods were shipped in good condition, then the insurance company will refund the purchaser for any12 damage to the goods which was caused in transit. If the Bill of Lading indicated damage prior to shipment, then the Buyer can take out action against the seller to reclaim his monies. This does not mean that the buyer must necessarily accept the goods once hey have arrived however. Unless the terms of the contract stipulate that the buyer cannot reject the goods13, they buyer is entitled to refuse to take possession of the goods if, at the moment of delivery14, an inspection reveals that the goods are not of the quantity and/or quality which was contract for, e.g. if only 5,000 Kilos of B-grade Desiree potatoes were in fact delivered by the chartered carrier to B. Ltd. The statutory remedy which is available in relation to this right is provided by s53(3) of the bargain of Goods Act 1979 (as amended), pertaining to an implied warranty over the quality of goods purchased. S53(3) of this Act states (3) In the case of breach o f warranty of quality such loss is prima facie the variance between the order of the goods at the time of delivery to the buyer and the value they would have had if they had fulfilled the warranty.One final point regarding the duty of the buyer under a C.I.F. contract it is the responsibility of the buyer to secure all the necessary import licences which are legally required for the product(s) in question. If any stage of the delivery is stalled as a result of the buyers failure to secure the necessary Custom permissions, then any conc shut outant damage to the goods, e.g. from their having to stay on board the carrier for an extended result of time and thus perishing, will be deemed, at law, his fault.In conclusion, whilst we have not been able to examine every single contractual and legal feature of the C.I.F. shipping contract, the above provides a near comprehensive description of the workings of such a contract in the real world. The C.I.F. contract is a standard termed too l which has been designed and evolved to ensure that the interests of each party to a shipping contract are protected, and also that the practical difficulties which would differently be faced by importers and exporters are somewhat mitigated.In receipt to the statement offered at the top of this paper I hope I have argued convincingly that this statement is absolutely incorrect. The fact that a C.I.F. contract is a shipping contract is merely a description of its limited industry application this description does not explain any of the labyrinthian and multifarious contractual and legal features of such a commercial arrangement. by chance what the statement meant to express what the fact that most of the legal and contractual features of a shipping contract are explained by the fact that it is a C.I.F. contract in that case, the statement would certainly be more correct, although event then, the complexities regarding the duties of rejection and the procural of valid documents cannot be gleaned from this description alone. I would argue, in final conclusion, that one should not attempt to explain the workings of the C.I.F. contract in one sentence alone. Such an endeavour will only serve to omit certain vital information and lead to a poor soul of the contractual and legal features thereof.References/ BibliographyAlastair C.L. Mullis. (1997). bourn for Breach of Contract in C.I.F. Contracts chthonian the Vienna Convention and side of meat Law Is There a upstanding Difference? Published in Lomnicka / Morse ed., Contemporary Issues in technical Law (Essays in accolade of Prof. A.G. Guest), Sweet Maxwell London (1997) 137-160. tush Adams The Negligent Carrier The Buyers Success The Modern Law Review, Vol. 45, No. 6 (Nov., 1982), pp. 690-693.Sassoon, David M., (2006). C.I.F. and F.O.B. contracts (London Sweet Maxwell, 5th Ed. 2006)Footnotes1 T. D. Bailey, Son Co. v. Ross T. Smyth Co., Ltd. (1940) 67 Ll. L. Rep. 147.2 1 W.L.R. 862 (QBD).3 In the ca se of Arnhold Karberg Co v Blythe Green Jourdain Co 1916 1 K.B. 495 the Court of Appeal confirmed, at 495, that under a C.I.F. contract, the seller is obliged to tender documents representing contracts which are valid and effective at the time of tender.4 Diamond Alkali merchandise Corp. v. Fl. Bourgeois 1921 3 K.B. 443.5 On this point, Mullis (1997) p139 writes The c.i.f. contract is a type of sales contract where, although physical delivery is contemplated, the contract is performed by the delivery of documents Termination for Breach of Contract in C.I.F. Contracts Under the Vienna Convention and English Law Is There a Substantial Difference? Alastair C.L. Mullis. Published in Lomnicka / Morse ed., Contemporary Issues in Commercial Law (Essays in honour of Prof. A.G. Guest), Sweet Maxwell London (1997) 137-160.6 As per Phillips J at 615 The Sirina 1988 2 Lloyds Rep. 613.7 Law Bonar, Ltd. v. British American Tobacco Company, Ltd. 1916 2 K.B. 605.8 In the case of Belgian Grain Produce Company, Ltd. v. Cox Co. (France), Ltd. (1919) 1 Ll. L. Rep. 546, it was held that the insurance policy must cover the goods for the continuous journey, i.e. from shipment to delivery.9 The importance of assignability within the context of commercial C.I.F. contracts was discussed, at length, in Diamond Alkali Export Corp. v. Fl. Bourgeois 1921.10 After all, the Bill of Lading represents the title in the goods and so B. Ltd. will not be able to take possession of the potatoes without these documents to say his ownership.11 However the buyer does not, and indeed should not, accept the documents if they have been tendered incorrectly. A convention in regards to this point was most elegantly expressed by McCardie in his famous and oft quoted dicta from the case of Mandre Saccharine Co. Ltd. v Corn Products Co. Ltd 1919 1 KB 198. He stated there may be cases in which the buyer must pay the full price for the delivery of the documents, though he can get nothing out of them, and though in any intelligible sense no property in the goods can ever pass to him i.e., if the goods have been lost by a cross excepted by the bill of landing, and by peril not insured by the policy, the bill of landing and the policy yet being in the proper commercial form called for by the contract.12 This is strictly true the insurance document will only cover the goods against all usual risks, and therefore, if the damage caused was repayable to an exception circumstance, there will be no form of pecuniary redress for the buyer. If the exceptional circumstances were caused by the carrier, the buyer may sue this company in the tort of negligence or even in contract law s2(1) Carriage of Goods by Sea Act, 1992 removes the normal rules of Privity to result the right to sue in such cases to be transferable.13 Shipton, Anderson Co. v. John Weston Co. (1922) 10 Ll. L. Rep. 76214 In the case of Kwei Tek Chao v. British Traders Shippers Ltd. 1954 2 QB 459, the High Court held t hat this right arises the moment the goods are passed over the ships rail on delivery.