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Blog 2

The nature of a Cost, Insurance, and Freight (CIF) contract – is it a contract for the sale of documents or for the Sale of goods
Table of Contents

Introduction
The essay is proposed to evaluate the nature of a Cost, Insurance, and Freight (CIF) contract – is it a contract for the sale of documents or for the sale of goods? Researchers support the arguments by reference to cases and statutes within the context of different laws and policies that are considered on a national and international scale. Discuss. The CIF contract has been in existence since the mid-nineteenth century. In the words of Lord Wright in 1940, “It’s a sort of contract that is being used more and more frequently in national and international for the purposes of sea-borne trade than any other contract,” and “it’s a kind of contract that is becoming more and more common than any other contract.” Despite the widespread use of this contract, there is still debate about whether it is truly a contract for the sale of goods or a contract for the sale of things in national and international context. It is difficult to reach a conclusion from the material presented by the judicial and legislative authorities. Once a type of contract has been discovered, it appears that opposing evidence supports the opposite conclusion.
Background
This essay explores whether CIF agreements can be seen as sales contracts for products for the selling of documents. The essay will take the relevance of CIF contractual contracts into account and focus on specific features of the activity, including the right to deny and transfer products and hazards evaluated at national and international level. These contractual characteristics are comparable to the contracts for the sale of normal products, and the difference between the CIF and the regular contracts shows that the CIF contracts are agreements for the sale of documents. While some of them might be regarded as contracts to sell products, the aim of the CIF agreement is not to sell the items themselves but to sell goods linked to the goods. The effectiveness of the agreement depends on the submission of documents that allow the buyer to dispose of and sell the product and the right to receive payment if it is tacitly damaged or threatened.
The CIF Convention states that the seller is responsible for the distribution, insurance and transportation of goods. Therefore, a CIF contract requires the seller to terminate the contract of sale, as well as the subsequent insurance and shipping contract, as well as the sale contract. As a result, the seller sets the price that will cover all these costs and takes away all the risks associated with depreciation and shipping costs thoroughly on a national and international scale.
According to the CIF agreement, the seller is responsible for covering travel and insurance at the destination port, and the buyer agrees not to pay for what is offered, but for the preparation and submission of shipping documents. This could be the first indication that a deal like this could truly be construed as a contract to sell documents. The seller fulfils his or her commitment by providing the proper documents; the seller is not required to ensure the timely delivery of the products, but the client does have a negative obligation not to block the delivery.
The Importance of the Documents
It is a context that plays such an important role in the CIF contract that lends it its unique characteristics, or that turns it into the sale of documents from a contract, in the first place. Providing the customer with the account of shipment, insurance policy, and invoice constitutes full performance of the contract by the seller (together with any other documents required by the contract, such as a certificate of quality or origin). These documents accurately represent the items and shield the customer from the majority of risks associated with transportation loss. They provide him the ability to handle the products before they get to their final destination. This document replaces the actual delivery of the goods and can be used to transfer the rights of these goods to the buyer, as well as his rights to retrieve the goods and to take legal action against the carrier in the event of loss, delay or other such events.
The meaning of the documents is determined by the law that allows the seller to issue documents even if the exhibited items have been damaged or lost, indicating the meaning of the item. In addition, the buyer must accept them if the documents comply with the agreement. If the buyer rejects them, he breaks the agreement even if the products fulfil the agreement, even if the buyer can reject the product himself if the documents are received and prove to be defective.” This determines the scope of the buyer’s rights as well as the extent of the seller’s obligations. “Either the buyer can refuse to accept documentation and demand the actual objects, or the seller can maintain documentation and supply the items that the documentation represents.”
Al-Daboubi, (2021) described the CIF contract as “a sale of goods paperwork” because of the focus placed on the documents. But Saidov claims that “while this statement clearly indicates how crucial the documents are, it is misleading; the contract still applies to the sale of the commodities covered by the Sale of Goods Act.” Saidov further claims that In fact, researchers will later discover that certain portions of the Sales of Goods Act dealing with risk passing do not apply to CIF contracts, which makes it necessary to distinguish CIF contracts from those relating to document sales. However, this is not entirely correct. Furthermore, because the buyer has no rights in relation to the goods themselves, the contract could more appropriately be described as a contract for sale of goods to be implemented by delivery of documentation, as was correctly concluded in the same case by the banks and the Honourable Lord Justice Warrington (Bank of England).”
CIF Contract in International Sales of Goods
In compliance with Article 141 of the United Kingdom Trade Transactions Law, a lump sum payment is made. This article describes the main characteristics of the CIF contract. The contract with CIF requires the seller to dispatch the agreed articles in the shipping port, to receive a bill of delivery to the agreed place, to arrange the purchaser’s insurance, to produce the commercial invoice and to submit such papers eventually. In this scenario, titles of the products may be forwarded or documentation submitted. The risks normally pass on shipments but only pass possession when the product paperwork is delivered in exchange for the price. The purchaser may, therefore, sue the carrier for breach of the carriage agreement and the underwriter for any covered loss upon receipt of the documents.
The CIF requires a clean bill of lading covering the contract to be sold, an insurance policy and a business account showing the amount. The buyer is liable for the documentation even if everything is lost or destroyed at sea. In the event of loss, the buyer shall bear the tender price of the document and seek remedy, as necessary, from the transporter or the contractor, but not from the seller under the sales agreement. According to Article 150 of the Commercial Transactions Act the purchaser shall repay the seller for any damage if he refuses to pay for the document without reason.
Whether both the purchaser and the seller knew about the loss of the ship before the latter documents were granted is irrelevant. The vendor may therefore provide evidence even if the customer was aware of the loss or loss of the ship or items at the time of the tender. In case of loss, instead of merchandise, the consumer receives the documentation. Even if the buyer had previously paid, the customer could not request reimbursement. A seller who has delivered the agreed items under a clean lading bill and received the right paperwork may provide such documents to the buyer, even if he is aware that goods are being lost.
In a CIF contract, the vendor supplies the buyer with documents. It is not necessary to deliver the things to the agreed place but must not hinder the purchaser’s delivery and block the carrier from transferring it to the buyer or to another domestic or foreign destination. Even though the contract contains the “CIF” letters, it does not regard a CIF contract to be a condition requiring a seller to deliver the things to the established place. Not all CIF agreements are CIF agreements. For example, in accordance with Article 155 of the Commercial Trade Act (CTA), “a contract which holds the seller liable after dispatch, condition or condition of performance for the loss of goods or allows the buyer to accept items based on contracts.
One of the documents necessary under a CIF contract is a leading bill. The contract may still require or permit a supply order from the seller. Since the English case for Re Denbigh Cowan & Co and R Atcherley & Co (1921) 90 LJKB 836, the arrangement was not legally accepted as a CIF contract only when the delivery order was replaced with a leading bill. The Julia (1949) AC 293 also authorised the seller to issue loading bills and delivery orders for rye “CIF Antwerp.” In another English case. The merchant delivered the rye in bulk and issued a partial order for transportation. This order came to the representative of the Antwerp seller. Therefore, the contract was considered for delivery in Antwerp and not in CIF. Care was missing since products were not uniformly supplied. If the vendor had supplied a loading document in Julia, it might be argued that the customer would have done his job and the transaction would be CIF.
CIF Contract and its Features
The obligations of the parties could have been better articulated in court: “The seller under the CIF contract must first ship the goods described in the contract; on the other hand, obtain a transport contract with delivery to the head of destination including the contract.” Third, take out insurance in accordance with the terms of this agreement. It follows that the buyer must be prepared to present these documents, bill of lading, invoice and insurance policy and be prepared to pay the cost thereof.”
Some products must be shipped: the agreement is unsatisfactory if the seller offers documents for shipping the goods or never sends them; however, the sender is not obliged to send the goods in person or after the conclusion of the agreement. In the same way, the seller does not have to conclude the transport or insurance contracts himself: If the goods are transported with a bill of lading, the bill of lading is transferred to the recipient to transfer the transport contract with a marine insurance if possible one waived. As the seller’s main obligation under the CIF agreement, where the contract sets a period for tendering, is the stipulation, and for a late tender the purchaser is eligible to withdraw.
Right to Reject
When the bill of lading specifies that the items were not in excellent condition for loading, is dated after the shipment period expired, or is indicated in quantity deficiencies. It’s hard to conceive of another form of sales contract that works similarly. The buyer loses his right to deny documents if he accepts them, even though they are incorrect, and pays the price.
A problem in the items is plainly visible on the paperwork, the purchaser cannot reject the goods upon arrival due to the defect. Before approving the documents, the buyer must thoroughly review them for contract compliance. This method is consistent with immobilisation completion and exchange. A buyer cannot refuse his residence if the fault was specified in the contract at the time of contract exchange. For example, if the price was incorrect, it could not be altered after the contract was exchanged. Of course, buying and selling real estate are both sales, and the CIF’s perspective is that they are sales contracts.
That the buyer’s rights to reject items in a CIF are significantly less essential than those influencing paperwork is no surprise. It is the right to reject products in CIF, not paperwork. If the items provided do not fulfil the contract’s conditions, they can only be refused by the purchaser who accepted the documents. If the buyer accepts papers confirming damage caused by the loading, the products will not be eligible for rejection once delivered.
If the paperwork are in compliance with the contract, the buyer cannot reject them because the things are defective. Inc. v. Gill and Dufus SA, the buyers declined a seller’s tender of documents. The customers claimed that the things delivered did not match the contract description. As a result, they were in breach of contract, but the Court could consider the fact that the articles would not have met the contract’s requirements when determining the amount of damages to be given.
The buyer acknowledges receipt of the documentation if it is used to resell or pledge the products before they arrive. In this situation, a buyer who uses the documents in this way loses his or her right to reject them due to defects in the documents themselves. The buyer or seller may still be entitled to recover damages if the consumer waives their right to reject the goods, such as when they accept defective goods paperwork.
After receiving the paperwork, the customer rarely refuses to accept the product. In practise, this is rare. His payment has already been received, and the rejection of the items allows him to sue the vendor for the money already spent. The amount of compensation is determined by the difference between the volume of the contractual items at their location and their real worth at the time of delivery. Rarely, a buyer may think that he is in a worse bargaining position than if he rejects the documents if the market value of the goods drops between the sale of the paperwork and the delivery of the things.
Passage of Property & Risk
When it comes to real estate transactions, the rule of thumb is that property leaves when the parties want it to and that no property is allowed to transport risky products. Ownership of the CIF contract often goes to the buyer when the invoice is received and the price is paid, granting the buyer the right to sell the item at any time. However, this is simply an assumption, and ownership can be transferred after the contract has been signed if the contract covers, for example, specific products or when the goods are being prepared for shipment; or after the assignment notice has been served. If the waybill is in the name of the seller, the seller retains the right to ownership.
When the products are loaded onto a ship’s tracks or when the items are transported at the buyer’s risk, the risk of loss or damage to the goods is typically transferred to the buyer, even if the freight and insurance premiums are paid by the buyer; the seller. The risk of loss is transferred with the presentation of the documents by the seller, but only retroactively, thus there is a risk of loss that occurred before the buyer submitted his or her offer if the seller has already sold the products on the ground. Having procedures in place provides protection to the carrier, according to the insurance.
Contracts for the sale of goods CIF are subject to Article 32 (2), which reduces the risk of loss for the seller, unless the seller has entered into a fair transport agreement with the buyer. CIF Contracts are an exemption to the common law included in Section 20 of the Commercial Real Estate Act, which allows for the transfer of risk in conjunction with the transfer of ownership in a commercial real estate transaction. When a property is transferred under a CIF contract and the buyer pays and collects the necessary documentation, the items are deemed to be at the buyer’s risk from the moment of delivery onward.
Conclusion
It seems difficult for this writer to conclude otherwise that the CIF contracts are actually a sale of documents. The most important legal rules regarding the sale of goods under national and international agreements do not apply to the sale of goods under the CIF agreement, but the sale of contracts. If sellers and buyers are reluctant to do so, researchers wonder why such a deal has been ratified. Retailers and buyers can find alternatives in national and international agreements.
The logic of this decision should be examined if it is concluded that CIF is responsible for the sale of documents and not goods. First, if there is a defect in the product and this is evident from the documentation, the buyer who accepts the documentation will also not be allowed to refuse the product himself when delivering the defect. Therefore, it is important for the buyer to carefully review the document to ensure that they are fulfilling the contract before it is accepted. It is difficult to imagine such a situation if this occurs in the sale of goods, however the concept of sales sample is taken immediately. Buyer may not refuse shipment immediately if it is of the same quality and classification as the sample. It will be difficult to identify the reasons why such items may be rejected if the product meets contract standards.
The documents that constitute a contractual agreement, like the CIF agreement, are based on the transfer of documents that give control of the product to the buyer, the right to dispose of the goods and the right to compensation if the goods are damaged by default or result in special covered coverage. When it is considered that documentation is the key to all contract goods and that it is important to establish the parties’ obligations when transferring risks and when the condition of the product is defined, CIF seems to be more than a sales document. . These documents form the basis of the entire agreement.

References
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Al-Daboubi, Derar. “How Delivery of Goods without Tendering of Bill of Lading Can Discharge Liability of Maritime Carrier.” Transactions on Maritime Science 10, no. 1 (2021): 260-268.
Asanwana, Ufuo, and Okor Efombruh. “Understanding FOB and CIF Contracts: And When Property and Risk Pass in These Transactions.” Available at SSRN 3278642 (2018).
ENAKIRERU, Eric Omo, and Aigbe Irene Airen. “THE NATURE OF TRANSFER OF RISK IN SALE OF GOODS CONTRACTS: A CRITICAL ANALYSIS.” The Nnamdi Azikiwe University Journal of Commercial and Property Law 7, no. 1 (2020).
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