International Sale Contracts Term Paper

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International Sales Contract

Ross T. Smyth and Co. Vs. TD Bailey Son & Co [1940] All ER

This paper will examine and discuss the specific implications of Lord Wright's statement and how this related to the seller and buyer, specifically in the context of the c.i.f. And f.o.b. contractual meaning.

In the historical case Ross T. Smyth and Co Ltd. Vs. TD Bailey, Son & Co. [1940] 3 All ER 60, Lord Wright, upon considering a dispute between the parties is said to have stated:

Now it is true that all these rules both under section 18 and section 19 are prima facie rules and depend on intention in this regarded by the parties is seldom or never capable of proof. It is to be ascertained, as already stated here, by having regard to the terms of the contract, the conduct of the parties, and the circumstances of the case.

What must be resolved in one's mind is Lord Wright's specific meaning by the statement above which he known for having stated. In order to examine exactly what he is saying to the buyer and seller, research precision must be explored as well as the definitions of the contracts for which either the buyer or seller has place themselves in.

Contracts: The Sale of Goods

The specific meaning of the term "goods' has posed many difficulties for the courts. Goods refer to that which is "tangible, physical and movable." A sale consists in the transferring of the title of goods from the seller to the buyer for a price [2-106(1)]. The seller is under obligation to make transfer and delivery of the goods and the obligations of the buyer are to make acceptance and payment in adherence to the contract. [1-301]. Basically, parties to a contract can agree upon whatever terms they desire as long as they are both agreeable to the contract.

The Parties agreement is inclusive of the bargain, which they struck as well as any previous dealing of the parties, general trade custom and usage, as well as any past trail of performance in relation to the present contractual agreement. The next statement is very important in understanding what Lord Wright's statement in actuality expressed concerning the scope of contract law.

A course of dealing" is a sequence of prior conduct between the parties, which gives a form basis for interpreting their communications and conduct between themselves."

This one statement conveys in a nutshell what Lord Wright's viewpoint on the contract protocol should be. Another term of importance is "usage of trade." This is simply a phrase that expresses that there are standards and protocols within every sector of the business world. Just as some things would be tolerated in one area of the world the very same would be shunned by the trade practice of another. "Course of performance" is descriptive of a contract that will require repeat performances.

Formation of the Contract:

The contract can left open in the area of the price term providing that this is fixed at some later date or by some agreement of market standard solution. Flexibility is allowed for in the Code and the Code also shows flexibility in terms of whether a contract is required to be written and as well in the scope of what is required to be written if indeed it is spelled out between the parties.

The Code is designed to ensure fair and balanced dealing between the parties in the "output" and "requirements" of the contract. After he details for a price and delivery have been agreed upon then the mode of freight should be considered.. The seller has an obligation to make transfer and delivery of the goods and upon releasing the goods to the carrier the seller has completed those obligations of the contract.

The proper contractual passing from the seller to the buyer of property is imperative. The general rules are located in the Sale of Goods Act, 1930 in Sections 18, 19, and 20. Interestingly, Section 18 contains the provision of property ownership in goods cannot pass "unless and until the goods are ascertained. Unascertained goods become ascertained once the buyer has agreed to the terms.

Section 19 Clause 1: makes provisions concerning the timing of the passing of the property as well as the establishing of the parties "intention" regarding what each considered to be the agreed upon terms of the contract.

Section 19 Clause 2 addresses that "for the purpose of ascertaining the intention of the parties shall be as to the terms of the contract.

In ascertaining what the intent was of the contracting parties the following can be obtained for proving prima facie intent.

There are considered to be three types of f.o.b. contracts as follows:

Classic F.O.B.: Buyer nominates vessel and seller makes contract of carriage.

Rarely Utilized F.O.B.: Seller nominates vessel, makes carriage of contract.

Most Commonly Used Today: Buyer nominates vessel and makes contract of carriage.

The Classic f.o.b. which, is the most common even in today's modern business world is the type of f.o.b. In which the buyer is responsible for the proper and effective selection of the ship, however the seller's responsibility is to contract the shipment, charging that cost to the buyers account and after having loaded the goods and obtained a bill of lading the goods are shipped on to the buyer who will in most cases pay costs plus shipping expenses.

This type is the most appropriate where the buyers good are required shipping on a certain type of vessel or foreign currency restrictions are involved. In this instance the buyer would most likely prefer to receive shipment through a vessel of the buyer's own nationality. This is one reason that the buyer generally chooses the ship. In the event that shipping arrangements are hard to find, or where the shipped items are small then the seller may choose the ship upon consent of the buyer.

III. Definition and Scope of the F.O.B. Contract:

The f.o.b. contract unless otherwise agreed to in the contract is taken to mean "free on board." F.o.b. refers to the place of shipment or the place the seller is required by the contract to have shipped the goods from and bear the expense or when the term is F.O.B. meaning the destination then the seller must pay expenses for shipping. This is an undesirable arrangement in most business contracts.

The seller's obligation for delivery of the goods has been concluded at the time the goods are delivered for shipment to the buyer's chosen carrier of the goods. This is deemed as delivery on the part of the seller.

This is not always the case however, but will be true only when the seller has not made provisions to reserve the right to disposal. This generally will be the chosen method and is usually the chosen method even after the fact of shipping. Therefore, it must be held that it is true that transfer of property does not take place until after shipment even if the goods have been completely purchased before shipment.

In Section 2-319 of the U.C.C. And under either of the above terms then the proper term is F.O.B. Vessel. As is clearly seen here there does leave some room for confusion between the buyer and seller. There are several options that could result in this contract.

Definition of the C.I.F. Contract:

The c.i.f. can be found in Section 2-320 of the Uniform Commercial Code. C.I.F. simply means that the price agreed upon between the two parties includes what is referred to as a "lump-sum" payment on the costs of the goods as well as any shipping, insurance freight or other expenses involved with the package arriving at the location requesting shipment. In other words, the C.I.F. is the inclusion of the following Costs



V. Specific Aspects of the C.I.F.: Duties

In the examination of C.I.F the understanding is gained that its purpose is only to be used in relation to costs and is understood to be used only in relation to costs and freight to the named destination. The term equating with C.I.F. point of arrival has to concern itself with the term as meaning "price = costs, friend and possibly insurance and shipping. In the event of a C.I.F. destination the seller's responsibilities are inclusive of the following for fulfillment of contract by the seller:

Place the goods within a carrier's possession in port for shipment and procure a bill or bills of lading that are negotiable that cover the entire shipping/transpiration for the goods to arrive at the selected destination.

Loading of the goods as well as obtaining a receipt from the carrier showing that transpiration, shipping costs and all other necessary expenses have been paid certificate of insurance should be obtained as well as any other risk coverage needs, for example during wartime the procurement of a "war risk insurance" is a sound procedure for shipping of goods. The current port shipment charge should…

Sources Used in Document:


In the Supreme Court of Africa (1999) Highveld 7 Properties et al. v. Timothy Luke Bailes [Online] available at appeals/31998.htm

Federal Court of Australia (1999) Westpac Banking Corp v. Stone Gemini [1999] FCA 434 [Online] available at

Smyth Ross T. & Co. Vs. T.D. Bailey & Co. (1940) All ER 60 (HL)

Online] available at

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