Advise the Parties on the

Advise the parties on the basis that the contract is CIf Calais. CIF means (Cost, Insurance, Freight) is a contract term used in contracts involving sea carriage. The price of goods in CIF contracts is inclusive of freight and insurance costs to the destination specified by the contract. The seller charges a higher price for obtaining the extra services.

Technically, a CIF contract is not a contract that goods shall arrive, but a contract to supply goods that comply with the contract of sale, and to obtain a contract for carriage and contract of insurance. The seller usually gets paid for the goods before their arrival at destination, since payment for goods in CIF contracts often takes place when the documents (invoice, insurance policy and bill of lading) are tendered to the buyer. However, the parties may agree to deferred payment credit, e.g.

30 days from the date of bill of lading. The goods do not have to be paid for until the relevant documents are tendered. The buyer also acquires the right to sue the carrier with the transfer of the bill of lading. b. A CIF contract is a contract where "…the vendor in the absence of any special provision to the contrary is bound by his contract to: 1. Make out an invoice of the goods sold. 2.

Ship the goods out of the port of shipment goods with the description of goods contained in the contract. 3. Third, to procure a contract of affreightment under which the goods will be delivered at the destination contemplated by the contract. 4. Fourth, to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer. 5.

Fifth, with all reasonable dispatch to send forward and tender to the buyer these shipping documents, namely, the invoice, bill of lading and policy of assurance, delivery of which to the buyer is symbolic delivery of the goods purchased, placing the same at the buyer's risk and entitling the seller to payment of their price. If no place be named in the CIF contract for the tender of the shipping documents they must prima facie be tendered at the residence or the place of business of the buyer. c.

Under the Sale of Goods Act, the seller can sue the buyer for damages for non-acceptance where he wrongfully neglects, or refuses to pay for the goods. Here, the seller can sue the buyer for nonpayment after the seller delivered the shipping documents, which are symbolic of the goods. Under a CIF contract, the buyer is obligated to render payment for the goods upon receipt of the shipping documents. Background Law Transfer of Risk In commercial contracts in general, risk passes along with property.

However, in CIF contracts, the passing of risk and the passing of property are not simultaneous. In CIF contracts, risk passes on shipment, whereas property normally passes much later, when the documents are tendered to the buyer. Since risk passes upon shipment, this places the buyer under an obligation to pay for the goods against a valid tender of documents. The buyer must accept a good tender of documents, and pay for the goods upon tender of the documents. He cannot postpone payment until the arrival of the goods.

This is the case even when the goods have been lost or damaged before the tender of documents. In C. Groom Ltd. v Barber, the goods were lost before appropriation to the contract due to war. The insurance policy did not cover loss or damage due to war. There was no right of action against the carrier. The buyer had to pay for the goods against the tender of documents.

Transfer of Property Property could pass upon the transfer of documents to the buyer and payment of the price by the buyer to the seller. In most CIF contracts, property generally passes this way. The property that the buyer gets, however, is conditional property. Property could pass on tender of bill of lading even though the buyer has not paid for the goods since the seller has agreed to give credit to the buyer.

Conclusion Because the property passed from the seller to buyer upon delivery of the documents, the seller is deemed to have met his obligation for delivery of goods. Thus, the buyer is obligated to render payment for those goods. Because risk passes from a seller to a buyer upon shipment, when the ship's rail leaves the port, the risk was no longer with the seller at the time the seller delivered the documents to the buyer.

Thus, the risk is with the buyer and the buyer has no recourse to the seller for the lost, damaged, or delayed goods. d. The Buyer can reject the documents upon tender, where the seller does not tender the right documents or where the documents are incorrect. In this case, the seller tendered the right documents to the buyer on time so B. cannot reject the documents on tender.

Also, the buyer appears to have accepted the documents on tender, so he may have waived his right of rejection of documents in any event. Thus, the buyer will not be able to withhold payment on grounds of non-delivery of documents. The buyer could also argue that the seller, as the procurer of an insurance policy in a CIF contract, should have gotten insurance to provide for risk of war.

According to this argument, the seller would be responsible for the lost or damaged goods due to his failure to get adequate insurance for the goods per the contract requirements. Background Law In a CIF contract, the buyer has a right to minimum insurance cover in accordance with the Institute of Cargo Clauses. However, the ICC contains a war exclusion clause. Thus, the standard minimum insurance cover does not include risk of war insurance.

However, where the buyer requires insurance cover for risks such as wars, strikes, riots and civil commotions, the seller must arrange such cover at the buyer's expense. Conclusion In this case, the seller did not arrange for risk of war insurance cover for the goods. However, the buyer did not request separate insurance cover for risk of war, which is necessary to create the obligation. Thus, the seller was under no obligation to procure risk of war insurance cover.

Minimum insurance cover is sufficient in this case to meet the seller's obligations under the CIF contract. b) Advise the parties on the basis that the contract is fob Dover. 1. FOB, "Free on Board," is a type of contract term that has been subject to varying uses over the years. It is defined in INCOTERMS as FCA ("Free Carrier"). 2. An FOB contract is a contract for the sale of goods where the seller agrees to deliver the goods over the ship's rail, and the buyer agrees to convey it overseas.

The seller's obligations in an FOB contract are as follows a. The seller must provide goods that are in conformity with the contract of sale. b. To prepare the invoice and other documents. The seller must provide a commercial invoice for the goods. The seller will also be required to furnish other evidence of conformity of goods. The sale contract would normally stipulate these. They are likely to be certificates of quality or certificates of inspection. c. To check, pack, mark and deliver the goods d.

Pay for loading costs and freight e. The seller must give sufficient notice to the buyer that the goods have been placed on board the ship. f. Export licences and customs formalities. g. The seller must provide the buyer with any proof of delivery of the goods. h. There is no obligation on the part of the seller to obtain insurance. The seller must provide the buyer, upon his request, with any information necessary for obtaining insurance. i.

The seller must bear the risk of any loss or damage to the goods until such time as the goods have passed the ship's rail at the port of shipment. The buyer's obligations under an FOB Contract are: (a) Notice to seller (b) Obtain Contract of Carriage (c) Accept transport document provided by the seller as proof of delivery. (d) Pay the price agreed by him in the contract of sale.

(e) the goods are at the buyer's risk from the moment they have passed the ship's rail at the port of shipment. (f) Payment of other costs, duties and taxes (g) Import licenses and customs formalities (h) Delivery to the buyer takes place when the cargo is placed on board the named ship on the date or at the stipulated time. 3. The seller can sue the buyer for nonpayment. Under an FOB contract, a buyer is required to accept the transport documents provided by the seller as proof of delivery.

Here, the seller delivered the shipping documents to the buyer as promised and the buyer seems to have accepted it, constituting a delivery of goods under the FOB contract. The seller is deemed to have delivered the goods at that point, and the buyer is therefore obligated to pay for those goods. 4. The buyer cannot reasonably deny that the seller delivered the promised shipping documents. Neither can the buyer claim that the seller should bear the risk of damaged goods.

As with CIF contracts, the seller in an FOB contract must bear the risk of any loss or damage to the goods until such time as the goods have passed the ship's rail at the port of shipment. The goods are at the buyer's risk from the moment they have passed the ship's rail at the port of shipment. 3.

Does it matter whether or not the seller advised the buyer that a war might break out between the two states as soon as the seller became aware of this fact? It depends on when the seller knew of the imminent war. FOB contracts have different notice requirements than CIF contracts which give buyers additional protections. These notice requirements only have consequence if they are neglected before a particular time in the shipping process.

Background Law Notice Where goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their sea transit and, if the seller fails to do so, the goods are at his risk during such sea transit.

Although this provision imposes no liability on a seller who fails to provide such notice, it does impose the burden of risk on a seller who fails to give adequate notice to the buyer. Imminent risk of war would likely be considered a "circumstance in which it is usual to insure." Thus, the seller would have been required to give notice to the buyer of the imminent war as may enable the buyer to insure them adequately during their sea transit.

The issue here is whether the buyer learned of the imminent threat of war before or after it was still possible for the buyer to take out risk of war insurance on the goods.

If the seller learned of the imminent threat of war while it was still possible for the buyer to take out special "risk of war" insurance on the shipment, he would have been required to "give such notice to the buyer as may enable him to insure them during their sea transit." Under these facts, the seller would have failed to give notice to the buyer to enable him to take out special risk of war insurance so the goods would be at his risk during sea transit.

In that case, the seller would have assumed risk for the goods that were later lost or damaged at sea. If the seller learned of the imminent threat of war when it was no longer possible for the buyer to take out special "risk of war" insurance, then it would not matter whether he notified the buyer of the imminent threat of war, because there was no possibility that the buyer could have taken out risk of war insurance for the goods.

Thus, the notice requirement would have had no effect on risk. 4. Does it matter a. Whether or not the ship and the goods on board have been destroyed? No, the buyer must accept a good tender of documents, and pay for the goods upon tender of the documents. This is the case even where the goods are lost, or damaged prior to the tender of the documents, and the seller is aware of the loss or damage to the cargo.

In Manbre Saccharine v Corn Products, the documents were tendered to the buyers two days after a submarine sank the ship carrying the cargo. The sellers were aware of this but, nevertheless, tendered.