Maritime Law Project

CIF and FOB Contracts

Roshni K T
620
VIII Semester
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CIF Contracts
A contract of sale c.i.f. (cost, insurance and freight) is a contract for the sale of goods on
special and well recognised terms. It is a contract which contemplates the carriage of goods
by sea, for the better part of this century has constituted the most important part of overseas
trade. It is known as a c.i.f. contract, for the price which the buyer has to pay is the cost of the
goods, together with the insurance of the goods during transit and the freight to the port of
destination.
Under this form of contract the seller performs his obligations by shipping, at the time
specified in the contract or, in the absence of express provisions, within a reasonable time,
goods of a contractual description in a ship bound for the destination named in the contract,
or by purchasing documents in respect of such goods already afloat, and by tendering to the
buyer as soon as possible after the goods have been destined to him, the shipping documents,
i.e., bill of lading for carriage of goods, a policy of insurance covering the reasonable value of
the goods, together with an invoice showing the amount due from the buyer.
It is to be observed that in a contract of sale c.i.f. there are two subordinate contracts made by
the seller. here is first the contract of carriage by sea which is known as the contract of
affreightment, under which the ship owner (the carrier) signs a bill of lading on receipt of the
goods. !econdly, there is the contract of insurance in accordance with which the underwriters
deliver a policy of insurance.
"ssence of c.i.f. contracts#
he essential feature of a c.i.f. contract is that delivery is satisfied by the delivery of
documents and not by the actual physical delivery of goods. $All that a buyer can call for is
delivery of the customary documents. his represents the measure of the buyer%s rights and
the extent of the vendor%s duty. he buyer cannot refuse the documents and ask for the actual
goods, nor can the vendor withhold the documents and tender the goods they represent&.
'
(ord !immons stated
)
, $ the salient characteristic& of a c.i.f. contract was that the $property in
Manbre Saccharine Co Ltd v. Corn Products Co Ltd *'+'+, ' -. '+/ at p )0). 1er 2c3ardie 4
2 Comptoir d Achat et de Vente du Boerenbond Belge S.A. v. Luis de Ridder Limitada (he !ulia"
*'+5+, A3 )+6 at p 6'7
the goods not only may but must pass by delivery of the documents against which the
payment is made.&
8n presentation of the shipping documents, if they are complete and regular, the buyer is
bound to pay the price, irrespective of the arrival of the goods9 but by paying he is not
precluded from subse:uently re;ecting the goods or recovering damages for breach of the
contract of sale if on examination the goods are found to be not in accordance with the
contract. If the goods are lost in transit or arrive in a damaged condition the buyer ordinarily
has his remedy under the policy of insurance or against the ship owner under the contract
contained in the bill of lading.
he shipping documents re:uire under a c.i.f. contract have been recognised in the past to be
a bill of lading, a policy of insurance and an invoice. !uch documents are re:uired today also
unless the contract otherwise provides. he general conditions of c.i.f. sale are not waived by
the substitution of a delivery order for a bill of lading, unless the contrary applies.
6
<ot every contract of sale which is expressed to be c.i.f. is strictly a c.i.f. contract. !ometimes
terms are introduced into contracts in that form which conflict with c.i.f. terms and prevent
them from being c.i.f. contracts proper. he Parchim
#
is one such example where the contract
was in the nature of a cross between a c.i.f. and f.o.b (free on board). he price included cost
and chartered freight to a "uropean port, but did not include the premium for insurance.
here were also provisions that in a certain event, the buyer was to find another ship to take
the goods, and in that event was to pay for storage until loading and for any excess freight
over the chartered freight. (ord 1arker, said $the contract ... has far more of the
characteristics of a contract f.o.b. altal *3hile port, than it has of a contract c.i.f. "uropean
1ort.& In La$ % Bonar Ltd v. British American obacco Co Ltd
&
, a printed clause in the
contract that the goods were to be at the seller%s risk until actual delivery to the buyers were
treated as repugnant to a transaction which was otherwise on c.i.f. terms and the clause was
held to be inapplicable.
! 'in(berg and )thers v. Barro$ *aematite Steel Co Ltd and Mc +ellar *'+==, ' (lyod%s >ep. 656
where a delivery order was used to expedite delivery, but this was held not to affect rights of an
unpaid seller under a c.i.f. contract.
" *'+'/, A3 '?7
# *'+'=, ) -. =0?
here may also be contracts on c.i.f. terms made sub;ect to conditions which, when they are
satisfied, will change the nature of the contract altogether. Until, however, these conditions
come into operation the contract is to be treated as c.i.f. contract. In certain cases, the c.i.f.
term may be supplemented by the addition of one or more initials such as c.i.f.e.
=
, c.i.f.c.
7
,
c.i.f.i.
/
, c.i.f.l.
+
Advantage of c.i.f. contracts#
c.i.f. contracts have helped in sea borne commerce. Its ob;ect is to enable cargoes afloat to be
dealt with by transferring the documents representing the goods. he price to be paid informs
the buyer of the amount he has to pay for the goods delivered at their destination, whatever
may be the place of the origin, or the freight rates that have to be paid. he seller, while
taking the risk of the rise or fall in price of the goods, the cost of carriage
'0
and the rate of
insurance before shipment, has the advantage of being able to obtain payment of the price of
the goods before their arrival at their destination, and even in the event of their loss in transit.
he buyer having received the documents, has the power of dealing with the goods for some
time, which may be substantial, in advance of their actual arrival. @is right to re;ect the
goods, if they turn out to not be in conformity with the contract, remains. he risk which he
takes is the risk that loss of or damage to the goods may not be covered by the bill of lading
or policy of the insurance.
he protection given to the buyer by the transfer of the documents is generally, not
necessarily, sufficient. It is not complete where loss or damage has been caused by a peril
excepted by the bill of lading (or in respect of which the carrier%s liability is limited) and not
covered by the policy of insurance. In such case, the buyer must pay the price against the
6 "xchange# either refers to banker%s commissionAcharge or that seller will absorb the exchange risk if
currency conversion.
$ 3ommission
% .uyer shall not be called to reimburse the seller for cost of discounting any bill with a bank.
& (anded# seller to bear the cost of discharge of goods from the vessel.
0 Bor an instance of c.i.f. contract where the buyer took the risk of the rise of freight after the date of
contract, see Acet,lene Corp v. Canada Carbide Co *'+)', = (I.( >ep 5'0 at p 5=/.
documents though he receives no indemnity (or less than full indemnity) in respect of the loss
or damage.
FOB Contracts
$%Bree on .oard% means that the seller delivers when the goods pass the ship%s rail at the
named port of shipment.
''
his means that the buyer has to bear all costs and risks of loss of
or damage to the goods from that point.
')
he B8. term re:uires the seller to clear the goods
for export. his term can be used only for sea or inland waterway transport. If the parties do
not intend to deliver the goods across the ship%s rail, the B3A term
'6
should be used.&
he B8. contract is very flexible. In its pure form (sometimes called $strict B8.&), the
buyer acts as the shipper and as such nominates the vessel, concludes the contract of carriage,
collects the bill of lading and pays the freight and insurance premium.
'5
he seller need only
put the goods on board the ship nominated by the buyer at the port of shipment, on the date or
within the period agreed and in the manner customary at that port.
'?
he seller must pay for
he seller therefore pays all expenses of delivering the cargo to the load port and of loading it
aboard the vessel. !ee -tochu -nternational. -nc. v. M/V 0estern Avenir '++/ A23 ??? at p. ??= (".C.
(a. '++7).
2 Incoterms )000, B8., paras. .? and .=. !ee also 3DArt, (td. v. @ong -ong Islands (ine
America, !.A. +50 B.)d ?60 at p. ?66, '++' A23 )/// at p. )/+' (+ 3ir. '++')9 )lbert Metal Sales
Ltd. v. Cerescorp -nc. *'++7, ' B.3. /++ at pp. +05D+0= (Bed. 3. 3an. per 1rothonotary @argrave).
! he B3A ($Bree 3arrier&) term is defined as follows in the Incoterms )000# $%Bree 3arrier% means
that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the
named place. It should be noted that the chosen place of delivery has an impact on the obligations of
loading and unloading the goods at that place. If delivery occurs at the seller%s premises, the seller is
responsible for loading. If delivery occurs at any other place, the seller is not responsible for
unloading.&
" Incoterms )000, B8., paras. A6(b) and .6(b) provides that there is no obligation on either the
B8. seller or the B8. buyer to contract insurance, but in practice the buyer has an interest in doing
so, being the party who bears the risk in the shipment from the time it is loaded.
# In performing this duty of loading, the B8. seller is prima facie deemed to have delivered the
goods to the buyer. !ee the !ale of Eoods Act '+7+, U.-. '+7+, c. ?5, sect. 6)(')9 he Bonde *'++', '
(loyd%s >ep. '6= at p. '56. !ee also Incoterms )000, B8., para. .5, re:uiring the B8. buyer to take
delivery of the goods when they have been delivered on board by the seller at the port of shipment in
accordance with para. A5
such delivery over the ship%s rail, as well as export duties, notify the buyer of such delivery
and provide the buyer with the commercial invoice (now includes an e:uivalent electronic
message) and such document or documents as will enable him to take possession of the goods
at the port of discharge or to obtain a bill of lading.
'=

he basic features of the f.o.b. term are out lined, namely, that a) the seller must pay the cost
and bear the responsibility of putting goods $free on board,& in other words, bear full liability
for the cost and safety of goods until the point of their passing the ship%s rail, and b) that upon
this being accomplished delivery is complete and the risk of loss in goods is there and
transferred to the buyer.
Bre:uently, however, the terms of the sale contract, custom, a course of dealing between the
parties or other circumstances (such as the convenience of the buyer) may impose additional
responsibilities on the seller in an B8. sale. In what is sometimes called an $extended B8.&
sale, it is the seller, rather than the buyer, who acts as the shipper. he seller books space on
the vessel, delivers the goods on board at his own expense, and procures a bill of lading
(usually as an agent of the buyer) and at the latter%s expense, which he must send to the buyer
(or a bank) promptly.
'7
he seller does not have to pay the freight, however, or to advance it
on the buyer%s behalf, such responsibility resting with the buyer, as well as the cargo
6 8rdinarily, such a document is the bill of lading. .ut in strict B8. sales, the seller does not contract for the
carriage and so does not obtain the bill of lading. @e must therefore obtain and furnish the buyer with some
other document entitling the latter to take possession of the cargo at destination or to obtain a bill of lading (e.g.
a mate%s receipt, shipping certificate or standard shipping note). Also, Incoterms )000, B8., para. A/, re:uiring
the seller to provide the buyer, at the seller%s expense, with $the usual proof of delivery& (which may be a
Ftransport document&) or, alternatively, to assist the buyer, at the latter%s re:uest, risk and expense, in obtaining
$a transport document& (i.e. a negotiable bill of lading, a nonDnegotiable sea waybill, an inland waterway
document or a multimodal transport document). !uch a document may be $replaced by an e:uivalent electronic
data interchange ("CI) message& where the seller and buyer have agreed to communicate electronically
$ Cepending on the terms of the contract, the seller, in an $extended& B8. sale may also assume the
responsibility for stowing the cargo ($B8.!&), trimming it ($B8.&) or both stowing and trimming it
($B8.!&). !ee Eoode, ) "d., '++? at p. +5=. !ee, for example, he <axos *'++', ' (loyd%s >ep. )+
(@.(.) (an B8.! contract)9 Pagnan S.p.A. v. rada1 )cean ransportation S.A. *'+/7, ) (loyd%s >ep.
65) (an B8.! contract). !ee also .arney >eynolds, $!towing, trimming and their effects on
delivery, risk and property in sales Ff.o.b.s.%, Ff.o.b.t.% and Ff.o.b.s.t.%& *'++5, (23(G ''+.
insurance arrangements. <or is the freight or insurance premium included in the price of the
goods.
In B8. sales, once the goods are aboard, the seller has no further responsibility.
'/
"ven where
he has procured the bill of lading, he is not necessarily treated as a party to the contract of
carriage.
'+
@e does not undertake that the goods will arrive safely or at all. he buyer
therefore is left to sue the carrier for loss or damage to the goods attributable to the latter%s
fault or negligence in performing the carriage andAor the cargo insurer if such loss or damage
falls within the coverage provided by the marine insurance policy.
Hhere the goods and the documents conform to the contract, the buyer must, of course, pay
the price stipulated in the contract. he buyer may re;ect the documents, however, if they do
not conform with the contract of sale, but the seller may cure the defect by tendering new,
conforming documents if there is still time to do so under the contract. he buyer may also
re;ect the goods, if they are nonconforming to the contract, even if he has already accepted
the documents, provided that the nonconformity was not evident on the face of the
documents. Alternatively, he may accept the goods and sue for damages for breach of
warranty.
Rules of passing of property
he general rules relating to the passing of property from the seller to the buyer in India are
contained in !ections '/, '+ and )0 of the !ale of Eoods Act, '+60 (the Act).
!ection '/ provides the general rule that property in goods cannot pass unless and until the
goods are ascertained. Eoods initially unascertained become ascertained when they are
earmarked or identified to the contract in such a way that the seller demonstrates an intention
that these particular goods will be used for the fulfilment of the contract. his was established
% he 'olden Rio *'++0, ) (loyd%s >ep. )76 at p. )77.
& 2nion -ndustrielle et Maritime v. Petrosul -nternational Ltd. (he Roseline" '+/? A23 ??' at pp.
??+D?=0, *'+/7, ' (loyd%s >ep. '/ at pp. )'D)) (Bed. 3. 3an.), where a bill of lading, showing the
seller as shipper, was issued to the seller and delivered by the latter to a bank in order to obtain
payment for the goods under a letter of credit. he bill was found to be be a mere receipt or document
of title in the seller%s hands, and the seller was held not to be a party to the true contract of carriage,
which was a voyage charterparty concluded between an agent of the buyer and an agent of the
shipowner
in the case of 0ait. Re
34
which has been the longDstanding authority in this respect. @ere the
buyer had paid in advance for ?00 tons of wheat out of a consignment of '000 tons on board
a particular ship. .ut before he could take delivery, the seller went bankrupt. he :uestion
before the court was whether the buyer could claim his ?00 tons. he court answered this in
the negative as it held that since the ?00 tons still formed the part of the bulk at the time of
the seller%s bankruptcy the property in them had not passed to the buyer despite him paying in
advance. herefore, all he could do was to prove as an unsecured creditor in the seller%s
bankruptcy. Although, in India this is still the law
)'
, in "ngland, this position has changed
with the recently introduced !ection )0DA in the ("nglish) !ale of Eoods Act, '+7+ which
provides that the property in unascertained goods may pass where the price has been paid. In
such a case the buyer obtains an undivided share in the bulk so as to become an o$ner5in5
common of that bulk. 8f course, the buyer%s interest in the bulk is a proportional one, relative
to that of other interested parties9 and the buyer is deemed to consent to deliveries out of the
bulk to the other ownersDinDcommon.
!ection '+(') provides that property is to pass when the parties intend it to pass. !ub;ect to
the goods being ascertained, it is for the parties to decide when property is to pass. 3lause ())
of this section further states that for the purpose of ascertaining the intention of the parties,
regard shall be had to the terms of the contract, the conduct of the parties and the
circumstances of the case. he starting point of modern discussion in this regard is the
decision of the "nglish 3ourt of Appeal in Aluminium -ndustrie Vaassen BV v. Romalpa
Aluminium Ltd.
33
, where the plaintiff was a Cutch company which sold aluminium foil to the
defendant, an "nglish company. he plaintiff had elaborate standard conditions of sale which
provided, inter alia, that the property would not pass to the buyer until they had paid all that
was owing to the seller and till then the buyer would keep the articles manufactured with the
foil as $fiduciary owner& of the seller. he buyer, if necessary, was to store the articles in such
a way that it could be clearly recogniIed as the property of the seller till the time of payment.
he buyer eventually became insolvent owing to the seller over J ',)0,000. he 3ourt of
Appeal held that the property had not passed to the buyer and he resold the goods only as the
20 '+)= All "> >ep 566
2 he parties may nevertheless include a clause in their contract effecting that property may pass in
unascertained goods against the payment of price, in part or in full.
22 ('+7=) ) All "> ??)
agent of the original seller and hence the latter were entitled to the retail price in preference to
the other creditors of the insolvent buyer.
Bollowing this case, many firms, seeing the advantage they could obtain by retaining
ownership in goods even though they had transferred possession of them to a buyer, adopted
similar provisions in their contracts. "ven in international sales this has been the standard
practice.
)6
!ection )0 gives the third rule which is the most important and lays down rules for passing of
property where the parties have not expressed an intention as to when the property should
pass. It states that where there is an unconditional contract for the sale o6 speci6ic goods in a
deliverable state, the property in the goods passes to the buyer at the time the contract is
made, and it is immaterial whether the time of payment of the price or the time of delivery of
the goods are both postponed. hus, firstly, the contract should be an unconditional one i.e. a
contract to which there are no conditions upon which the passing of property depends.
!econdly, the sale must be of specific goods. !pecific goods are goods that are identified and
agreed upon at the time the contract of sale is made. hirdly, the goods must be in a
deliverable state i.e. the state in which they are to be delivered by the terms of the contract. In
other words, it can be said that the goods are in such a state that the buyer would under the
contract be bound to take delivery of them.
Passing of property in international sales
In international sales the seller and the buyer are situated in different countries and hence
there is a fairly strong presumption that the seller does not intend to part with the property
until he has been paid or has been given ade:uate assurance for the same.
)5
!ection )6()) of
the Act states that a seller who delivers the goods to a carrier for transmission to the buyer is
to be taken to have unconditionally appropriated them to the contract if he does not $reserve a
right of disposal&. Hhether the seller has reserved a right of disposal is a :uestion that
depends, in the first place, on any relevant provisions in the contract itself. he right of
disposal can also be reserved by the way in which shipping documents have been made.
2! !uch a clause is popularly known as a $>omalpa clause& deriving its name from the above case.
2" 8f course the presumption can be rebutted if the contract provides for the specific time and place
for passing of property
@owever, difficulty arises in cases where the contract itself contains contradictory provisions.
In 7ippon 8usen +aisha v. Ram9iban Sero$gee
3&
the contract provided for payment by cash
against the mate%s receipts. @ad this provision stood alone, it would have postponed the
passing of property until such payment. he contract, however, further went on to provide
that so long as the mate%s receipts were in the possession of the seller, his lien was to subsist
until payment in full. his clause led to the conclusion that the property had passed before
payment for the seller could not have a lien over goods which were his own property.
.y !ection )?()) of the Act, a seller is prima 6acie taken to have reserved the right of disposal
if the bill of lading is made in the name of the seller or his agent. Hhen this is the case, the
property will not pass merely by virtue of shipment as here mere shipment will not mean an
$unconditional appropriation& of the goods by the seller. .ut it would be a different case if
the bill of lading is made to the order of the buyer. If the bill of lading is endorsed in blank, or
to the buyer%s order, and sent directly to the buyer, the property will pass to the buyer unless
contrary intention appears from the terms of the contract or from the circumstances in which
the bill was sent (sending the bill through his agent with instructions to present it in exchange
for payment).
he seller may, also, send to the buyer a bill of exchange together with a bill of lading. In
such a case, the buyer is under a contractual obligation to honour the bill of exchange if the
bill of lading is according to the terms of the contract. If the buyer does not honour the bill of
exchange and wrongfully retains the bill of lading the property in goods does not pass to him.
F.O.B. contracts
he term 6.o.b. signifies 6ree on board i.e. the seller fulfils his obligation to deliver when the
goods have passed over the ship%s rail at the named port of shipment. An 6.o.b. seller is not, in
the absence of specific stipulations in the contract, bound to find shipping space for the goods
or to insure them9 and the cost of carriage or insurance, even if these terms are procured by
the seller, is normally for the buyer%s account.
he cardinal rule in cases of 6.o.b. contracts is that the property and risk pass on shipment i.e.
when the goods have passed over the ship%s rail and the risk in each parcel of the cargo will
pass when it crosses the same.
)=
hus the seller%s obligation under an 6.o.b. contract comes to
an end when the goods are delivered for shipment to the carrier named by the buyer at the
2# '+6/ A3 5)+ # ('+6/) ) All "> )/?
named port of shipment. Hhen this is done the seller is deemed to have delivered the goods
to the buyer.
@owever, this is true only where the seller has not reserved a right of disposal. As
an 6.o.b. seller :uite commonly does reserve a right of disposal even after shipment, the
abovementioned rule i.e. property passes on shipment seems to hold little water. herefore, it
becomes necessary to restate the general rule negatively i.e. property does not pass before
shipment. his would be true even in the case where goods have been wholly paid before
shipment. Additionally, where the sale is of specific goods in a deliverable state the property
in them would not pass to the buyer, in an 6.o.b. contract, at the time when the contract is
made
)7
since shipment of the earmarked goods is an essential condition to be fulfilled by the
seller in such cases. !upport for this can be drawn from the words of 1earson, 4. in Carlos
:ederspiel % Co. SA v. Charles $igg % Co. Ltd.
3;
where he said#
$*B,or the purpose of passing of property a mere setting apart or selection by the seller of the
goods which he expects to use in the performance of the contract is not enough K usually,
but not necessarily, the appropriation act is the last act to be performed by the seller. .ut, here
the important and decisive act remained to be done by the seller who was to send the goods
to the port o6 shipment and have them shipped. Accordingl, propert, had not
passed.&
)+
(emphasis supplied)
In the instant case, children%s bicycles were sold through an 6.o.b. contract9 freight and
insurance were to be arranged by the seller, on the buyer%s account. he goods were paid for
and packed in cases marked with the buyer%s name. Although shipping instructions were
given, the goods were never shipped, nor even dispatched from the works of the seller. 8n the
seller%s insolvency, the :uestion arose whether the property in goods had passed to the buyer.
It was held that the property had not passed to the buyer since in international sale contracts,
26 Colonial -nsurance Co. o6 7e$ <ealand v. Adelaide Marine -nsurance, ('//=) ') A3 ')/. he
risk would pass over to the insurance company in cases where the buyer is ade:uately covered by
insurance.
2$ See !ection )0 of the Act
2% ('+?7) ' (loyd%s >ep )50
2& -bid., at p. )??
it is a specific obligation of the seller to ship the goods and till this is done, both risk and
property remain with the seller.
C.I.F. contracts
A c.i.6. contract is an agreement to sell goods at an inclusive price covering the cost of goods,
insurance
60
and freight. he seller in a c.i.6. contract fulfils his part of the bargain by tendering
to the buyer proper shipping documents (which include the contract of affreightment,
insurance policy and the bill of lading) after having shipped, or sold afloat, goods in
accordance with the contract. -6 he does this. he is not in breach even though the goods have
been lost be6ore such tender. In the event of such loss the buyer must nevertheless pay the
price on tender of documents, and his remedies, if any, will be against the carrier or the
insurer but not against the seller.
he passing of property in c.i.6. contracts is of great significance as it carries serious
conse:uences for the parties in cases of insolvency of any party or the loss or destruction of
goods where such loss or destruction is not covered by insurance. 1roperty in c.i.6. contracts
passes to the buyer when the seller transfers the bill of lading and the insurance policy to him
thereby giving him the right of action in respect of loss or damage to the goods. he goods
are placed at the buyer%s risk from that point onwards. @owever, the property in goods may
not pass if the seller reserves a right of disposal. (ord Hright in Ross . Sm,th % Co. v. .=.
Baile,. Son % Co
>?
.

observed that in c.i.6. contracts, property would not pass on shipment in
cases where the seller reserves a right of disposal, which is to be inferred from retention of
the shipping documents by the seller or his agent for presentation to obtain payment.
Additionally, the seller in modern conditions is usually not content to rely on his right of lien
or stoppage in transit but wishes to reserve a right of disposal. his is so where the seller has
taken a bill of lading to the order of the buyer but retained it in his possession. he situation
is even clearer where the seller has taken the bill of lading to his own order or to the order of
the bank which has financed the transaction.
6)
!0 Under a c.i.6. contract the seller is only re:uired to obtain insurance on minimum coverage
! ('+50) 6 All "> =0
!2 Ben9amins Sale o6 'oods, 6rd "dn., !weet and 2axwell, para '=/7.
!imilar to an 6.o.b. contract, where a c.i.6. contract is for specific or ascertained goods the
property in them does not pass before the goods are shipped. his is so, since, though the
goods are ascertained or agreed upon, not only shipment is an essential condition to be
performed by the seller, but both the bill of lading and the insurance policy cannot in the
ordinary course be properly filled out and issued until the shipment agreements have been
completed.
In cases of c.i.6. contracts the goods are generally appropriated to the contract when they are
already sailing on the high seas. It is usual, therefore, for the seller to send to the buyer a
notice of appropriation stating the precise :uantity of goods appropriated, the name of the
ship, the dates of the bills of lading etc. Hhere the contract re:uires the seller to furnish such
a notice, the re:uirement is an essential condition of the contract to be performed by the
seller. @is failure to comply with it entitles the buyer to re;ect the documents and rescind the
contract.
he buyer who has paid for and accepted documents which appear to be conforming prima
6acie could still re;ect the goods if they do not conform to the contract. If he re;ects the goods
and signifies his re;ection to the seller, the property in goods returns to the seller.
66
It is
submitted, that this remedy is available only in the case where the seller has shipped nonD
conforming goods in the first place. Hhere the general character of goods has changed during
the voyage, the seller cannot be held liable for it. he claim in such a case, as has been stated
earlier, must lie against either the insurer or the carrier as it would be un;ust to hold the seller
responsible for the deterioration of goods that have long ceased to be under his control and
supervision.
!! +$ei e@ Chao v. British raders and Shippers Ltd., ('+?5) ' All "> 77+.
.ibliography
Cavid !assoon, 8rren 2erren, 3IB and B8. 3ontracts, !tevens L !ons, (ondon, 6
rd
ed. ('+/5)
4ohn Hilliamson, Bob 3ontracts# An "xamination of their 1rinciples and 1ractical
Application in Internal rade, ? Auckland U. (. >ev. 57= '+/5D'+/7
Aashish -aul, 1assing of 1roperty in International !ale 3ontracts D A 3onceptual
Analysis, ()006) 1( Heb4our '6
8nline !ources#
htt'())ranari*wanh+ssain,word'ress,com)20!)0")0)sa-e.o/.0oods.
'assin0.o/.ris1.and.'ro'ert2)comment.'a0e.)
htt'())www,-awteacher,net)contract.-aw)essa2s)ci/.and./o3.contracts,'h'