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Contracts Involving Sea Routes

The document outlines different types of sea route contracts, specifically Free on Board (FOB) and Cost, Insurance & Freight (CIF). FOB requires the seller to load goods onto a ship at their expense, after which the buyer assumes risk and responsibility. CIF includes costs for insurance and freight, with specific seller duties outlined, including providing shipping documents that transfer property to the buyer upon delivery.

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137 views7 pages

Contracts Involving Sea Routes

The document outlines different types of sea route contracts, specifically Free on Board (FOB) and Cost, Insurance & Freight (CIF). FOB requires the seller to load goods onto a ship at their expense, after which the buyer assumes risk and responsibility. CIF includes costs for insurance and freight, with specific seller duties outlined, including providing shipping documents that transfer property to the buyer upon delivery.

Uploaded by

bhatnagarsakshar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Contracts Involving Sea Routes

 Free on Board (FOB)


 Cost, Insurance & Freight, (CIF); and
 Ex Ship
FOB Contract

 Means free on board.


 The seller has to place the goods on board a ship at his own
expenses. He has only to bear the expenses of loading the goods.
Thereafter the goods are at the buyer’s risk and he is responsible
for freight, insurance and subsequent expenses.
Continued

 This legal hypothesis was adopted by supreme court in Marwar


tent factory v. UOI (1990) 1 SCC 71 where the following passage
from Halsbury was cited with approval-
 Under a free on rail contract(FOR) the seller undertakes to deliver
the goods into railway wagon( depending on the practice of the
railway) at his own expense and (Commonly) to make such
contract with the railway on behalf of the buyer as is reasonable
in the circumstances. Prima facie the time of delivery FOR fixed
the point at which property and risk pass to buyer and the price
becomes payable.
Continue with case

 Applying this principle to the facts of the case, it was held that
the seller was absolved from his liability on proof of the fact that
he had loaded a full quantity. The buyer could exercise his rights
as owner against the carrier for shortage at the destination.
 Thus property passes to the buyer as soon as the goods are put
on board the ship.
 The buyer cannot demand delivery of goods otherwise than on
board the ship.
CIF Contracts

 CIF indicates that the price is to include cost, insurance and


freight.
 It is a type of contract which is more widely and more frequently
in use than any other contract used for purposes of sea-borne
commerce.
Johnson v. Taylor Bros. & Co Ltd
1920 AC 144 (HL)
 The Duties of the seller under a CIF contract have been stated by
Lord Atkinson in this case.
 The seller in the absence of any provisions to the contrary is
bound by his contract to do [the following] things:
 First, to make out an invoice of the goods sold.
 Second, to ship at the port of shipment goods of the description
contained in the contract.
 Third to procure a contract of affreightment under which the
goods will be delivered at the destination contemplated by the
contract.
Continued with Case

 Fourth, to arrange for an insurance upon the terms current in the


trade which will be available for the benefit of the buyer.
 Fifth, with all reasonable dispatch to send forward and tender to
the buyer these shipping documents namely, the invoice, the bill
of lading and the policy of insurance, delivery of which to the
buyer is symbolical of delivery of the goods purchased, placing
the same at the buyer’s risk and entitling the seller.
 The property in the goods passes to the buyer on the delivery of
documents. This is the main difference FOB and a CIF contract.

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