We will bear all those charges and put it free on board the ship, the name of which you are to furnish. Cif is considered a more expensive option when buying goods. Eventhough both of them are used in commercial law, cif and fob contractcs have few distinguishing. The fob terms are an important part of the purchase contract. Cif and fob contracts bill of lading private law scribd. A good rule of thumb when doing business in international trade is that you should buy fob and sell cif. Got it fob free on board and cif cost, insurance and freight contracts are related to international exports. Difference between fob and cif compare the difference. Whether drafting contracts or considering the nature of these provisions in the context of a dispute, sassoon offers an easytouse reference to the principles behind cif cost insurance freight and fob free on board contracts. Fob contracts relieve the seller of responsibility once the goods are shipped. Each incoterms envisages different rights and obligations for buyers and sellers. Request pdf on jan 1, 2018, ufuo asanwana and others published understanding fob and cif contracts. The significant feature of a cif contract is that performance of bargain is to be fulfilled by. Termination in regards to breach of time and documentary obligations in cif contracts comparative study between the english law and united nations.
Learn vocabulary, terms, and more with flashcards, games, and other study tools. If something cif and fob contracts essays is wrong with your order, our support team will help you. It is perhaps easier to see how a laycan might appear more at home in a fob contract, where the buyer is responsible for the carriage. Unless otherwise expressly agreed in writing in the sales contract, this part one of these general terms and conditions shall apply only to all fob sales of products to be performed as sellers, either by cepsa trading, s. It is important to have an understanding of cost and freight cfr, cost, insurance and freight cif and free on board fob. International contracts typically contain shorthand terms incoterms describing when the risk of loss transfers from a seller to a buyer. Everyday low prices and free delivery on eligible orders. Generally speaking, where parties contract under an fob contract, property and risk passes on shipment colonial insurance co of new zealand v adelaide marine insurance 9. However, cif contract has a very significant difference from fob contract. This lesson provides you with basic information about each of the major types of fixedprice contracts, the budgeting policies that affect them, and specific examples and exceptions to those. Finding no such agreement, i decided to finally make a contribution. But establishing that startup on your own can be quite a challenge, especially if you do not have sufficient funds. Edited by f lorenzon, senior lecturer, university of southampton, and others.
The buyer should note that under the cif term the seller is required to obtain insurance only on minimum cover refer to introduction paragraph 9. Understanding the mechanics of fpif contracts cont. According to case smyth and co ltd v baily son and co ltd, cif contracts summarised by lord wright is a type of contracts which is more frequent and the most popular in use than other contract. Cost, insurance, and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. The international sale of goods and incoterms from a maritime lawyers perspective incoterms are terms published by the international chamber of commerce icc, dealing with aspects of the sales contract such as. It is the duty of the seller to clear the goods for export, and the cost as well as risk. Under cif which belongs to incoterms group c main carriage paid, the seller nominates the vessel and pays the cost and freight to bring the goods right to port of destination. Cost, insurance and freight cif contracts law times. These terms have been put in place so as to maintain uniformity, certainty and predictability in international trade agreements. Unless otherwise specifically agreed, any delivery of the product will be one. Xxx ademuniodeke, phd insurance of cif and related. Contracts dealing with goods to be shipped often include an fob clause, which stands for free on board. The character of fob contract in trade law is to certify that the contract of.
The cif, as well fob, is one of the most common sale contract forms in nowadays trade, probably morethan any other contract used for the purpose of seaborne commerce it is relatively a recent type of contract in the lex mercatoria, which appears in the middle of the 1800 and it has increasingly spread in the mercantile. Ive downloaded a couple of precedent contracts over the past few months from the crowdsourced contract application docracy for use in my legal practice. The main differences between cif and fob contracts under. Cost, insurance and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. Incoterms as a form of standardisation in international. In contrast, property in cif contracts does not normally pass until the transfer of the documents in. An examination of their principles and practical application in internal trade by john williamson introduction this article is a brief study ofvarious legal aspects and practices of international trade. Delivery obligations under cif contracts in any case. They are among the most common of the 12 international commerce terms incoterms established by the international chamber of commerce icc in 1936. Ifrs 15 and incoterms revenue recognition of export sale.
Incoterms are issued by international chamber of commerce and are the essential part of the sale contracts. The transit risks pass as from shipment also in fob contracts. To conclude, cif and fob contracts are the most important contracts in the field of international trade. Critically analyse this statement in relation to c. In the context of a cif contract, where it is the sellers obligation to make the carriage arrangements and ship the goods, it is difficult to see how the laycan concept might usefully fit into that arrangement. The article argues that, all factors considered, cif parties should view their contractual undertaking, common law principles and incoterms provisions only as prima facie and minimum guidelines. Contracts british shipping laws sixth edition by filippo lorenzon with yvonne baatz for chapters 15 and 16 isbn. Covers in full the cif and fob incoterms 2010 rules often incorporated by reference in shipment sales of commodities and manufactured goods. He has to perform the contract by tendering conforming documents to the buyer. The united nations convention on contracts for the international sale of goods cisg does not refer to trade terms. May 18, 2010 in this case study, patina is the seller and luca is the buyer under an fob free on board agreement. The fob free on board and cif cost, insurance and freight contracts are involved with international export sale contracts also called. Contract law free on board fob cif essay 1547 words.
In extended fob contracts, the seller will invoice the buyer separately for the extra services that he undertakes. Cif and fob contracts 5th edition by lorenzon, filippo, skajaa, lynne, baatz, yvonne, sassoon, david m. Apr 24, 2018 cost, insurance and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. In cif contracts on the other hand, cost, freight and insurance are already included in. In all cif, and arguably in many fob contracts, possession is transferred constructively, by means of the shipping documents, which represent the goods. Under fob terms the seller bears all costs and risks up to the point the goods are loaded on board the vessel. May 15, 2014 the same wording is used for the fob contracts prevention of delivery clause, with the difference being in terms of delivery rather than shipment.
Difference between cif and fob contracts business law. Both the fob and cif contracts are both very important contract under the international commercial law. This work provides a comprehensive statement of the law and practice relating to cif and fob contracts, the two main international shipping contracts. Contract no 9a january 2014 contract no 5 january 20 contract no 2 january 2015. The cif, as well fob, is one of the most common sale contract forms in nowadays trade, probably morethan any other contract used for the purpose of seaborne commerce.
I have a question regarding air courier shipping terms. Includes express references to the most common standard form contracts in current use such as the gafta 2010 edn, and fosfa 2008 edn c. The cif seller or fob buyer who charters a vessel to fulfil its. The fob free on board and cif cost, insurance and freight contracts are involved with international export sale contracts also called export transactions, although the fob contract is loosely used in local commercial transactions. In contrast, property in cif contracts does not normally pass until the transfer of the documents in exchange for payment of the price. These terms have been put in place so as to maintain uniformity, certainty and predictability in. The rights and duties of the transacting parties under fob international sales contract puja soni abstract free on board or fob is a trade phrase frequently invoked in an international as well as domestic sale contracts. Fob stands for free on board, and is a contract between the buyer and seller, where the seller has to load the goods himself on a vessel that has been nominated by the buyer. The rights and duties of the transacting parties under fob. In general, an amalgamated clause is in our view better than separate force majeure and prohibition clauses, creating a consistency in dealing with different events preventing shipment. Therefore, fob contract requires a seller to deliver goods on board a vessel that is to be.
Under the sales contract, if the buyer is to receive more than one shipment, a such shipments shall be evenly spread. Covers the following for each of the cif and fob contracts. There is much talk in the trade world about incoterms and how something is shipped. Consequently, the seller contracts for insurance and pays the insurance premium.
Rights of buyer in cif contracts business recorder. He has to perform the contract by tendering conforming documents to the. This chapter focuses on the legal nature of cost, insurance and freight c. Contract 43 chapter 4 shipment 65 chapter 5 the bill of lading and other transpor t document s chapter 6 the policy of insuranc e chapter 7 other documents 203 chapter 8 buyers obligations under a c. In other words, in cif the cost of carriage from the sellers prem. Home terminology difference between cif and fob contracts. These terms promotes uniformity and certainty in international. The seller meets cost of goods, freight and marine insurance. The supplier will be sending the goods via air courier however they initially sent me a contract containing fob terms.
The price includes all the expenses incurred until goods are actually loaded on board the ship at port of shipment. The distinction between cif cost, insurance and freight and fob free on board contracts is well recognized in the commercial world. Any unauthorized distribution or use is prohibited. This would also mean that the buyer would have to bear the market fluctuations in that case.
Apr 12, 2014 abstract free on board or fob is a trade phrase frequently invoked in an international as well as domestic sale contracts. Read more and learn how the performance of a cif contract affects vendors and purchasers conducting international trades. In a 1921 case, colley v overseas exporters, justice mccardle added an essential point of fob contracts where the fob is to a vessel. In one of the litigations on cif contracts many issues arose and gave rise to divergent propositions raised by the contesting parties. This latest edition of a wellknown work on cif and fob contracts is a welcome addition to the literature on the english law of international sale of goods. This document and the information contained herein is the property of aptac for exclusive use by its members. Contracts fob law and legal definition uslegal, inc. Should the buyer wish to have the protection of greater cover, he would either need to agree as. Cif and fob contracts share significant characteristics lacking from other varieties of international sale contract. When i needed a simple contract for the sale of goods today, i checked in to see what was available. Critically assess the rules on risk in relation to cif and fob contracts. Termination in regards to breach of time and documentary. This lecture paper explore in succinct the obligations of seller and buyer under c. It is surprising that any exporter of goods would want to contract under cif terms.
B contracts and further the focus will be on the legal perspective and the roles of the shipping documents in c. And when property and risk pass in these transactions find, read and cite all. Sale of goods, marine cargo policy, cif and fob contracts, angloamerican law, common. The essence of the cif contract law contract essay. Cost, insurance, and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a. Fob and cif are the two most popular price terms of the inco terms. An analysis of the risk regimes of a few selected national systems will show that each has their own understanding of these trade terms. A cif contract is an agreement to sell goods at a price which is inclusive of the cost of goods, insurance charges and freight.
It is important to first note the difference between the shipping terms cfr and cif. Free on board fob is a trade term that indicates whether the seller or the buyer has liability for goods that are damaged or destroyed during shipment between the two. This means that the goods will be shipped to a specific place without cost. Law schools,university,business law,commercial law, contract law,company law,law notes,jobs,migration. Cif contracts are more detailed and the performance of the contract needs to be done by fulfillment of many specified conditions, delivery of documents to the buyer thus the fob contracts are more flexible than of the cif contracts or more free. The right to reject the documents and goods in cif contracts a cif contract, which stands for cost, insurance and freight, represents one major commerce terms incoterms adopted by the international chamber of commerce. The character of fob contract in trade law is to certify that the contract of sale, entered between vendor and purchaser, is followed by the buyer as the sellers liability is limited to the shipment of goods. The main problem revolved around the buyers right to reject the documents or the goods in a cost insurance and freight cif contract. Cif contracts international sale of goods 08 22340 studocu. Cost, insurance and freight cif and free on board fob. The sellers responsibility does not end at that point unless the goods are appropriated to the contract that is, they are clearly set aside or otherwise identified as the contract goods.
Obviously, this will normally be as the goods are swung in their container onto the ship. Cif contract is that when the seller has delivered the goods or provides them afloat. This means that the goods will be deemed to be delivered to the buyer at the point that the goods pass the ships rail. The ma in d ifferences between cif and fob contracts under engl ish law cif contract is that when the seller has delivered the goods or provides them afloat. For example, the exxon mobil fob terms provide for time of delivery of the vessel not to be a condition. Money can be a precious commodity of exchange if used wisely, and one such best way to make good use of it is to establish a new business contract. Extension clauses are a regular feature of both cif and fob contracts, usually giving one party an automatic right to extend the contract period. Understanding the correct point of delivery in cif incoterms. The flexibility of the free on board fob contract makes it a far more attractive international sales contract option for exporters than the cif. Sample contract for the sale of goods thecontractsguy. One key fob per residence will be available at no charge. Cif contracts in international sales of goods what is a. The international sale of goods and incoterms from a maritime.
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