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- International Commercial Transaction Law

: 100777
: International Commercial Transaction Law
: 2010 : 10
: 25.00 . ( WMU )
International Commercial Transaction Law

1) the partiesrights and duties under the CIF contract;
Sellers Rights and Duties
Under the CIF contact, the seller is required to deliver the goods on board of the vessel at the agreed port of delivery.
According to the CIF contract, the seller has to bear all costs relating to the goods until delivery of the goods on board the vessel. However, under the CIF contract, the sellers duty to provide a contract of carriage and has to insure the goods under the insurance contract. Moreover, the insurance policy has to protect to the buyer. Otherwise, the seller commits to breach of the contract [1, p. 404].
Under the English Law, there is no general rule to obtain an export licence. It depends on the contract, which the party, who has the best position to obtain it. According to Brandt &co. case is that, .. both seller and buyer were British traders albeit that the buyer was securing goods from an overseas merchant so he has to apply for the export licence, because he alone knows full facts regarding the destination of the goods. [2, p. 748]
On the other hand, if the seller is in a better position than the buyer, he is responsible to provide a licence.
Under the CIF contract, it is also sellers responsibility to provide an export licence.
CIF seller has to provide a commercial invoice in order to get a payment. These documents must include the full description of the goods, the parties, price, shipping mark and numbers, the part of loading, route, and the port of discharging. The seller must tender the documents to the buyer.
The seller must give notice to the buyer that this notice may enable him insure the goods during the sea transit [3, p. 3].
The notice must be given without delay. Any fail to give notice, makes the seller still liable on the goods during the sea transit.
According to the CIF contract, the seller has also to give the buyer sufficient notice that the goods have been delivered on board the vessel.
Buyers Rights and Duties
Under the CIF contract the buyer has no under obligation to procure a ship, place, and shipping time. On the other hand, the buyer main duty is to accept the documents, which will be explained in detail later, if these documents are in conformity with the contract of sale.
A CIF buyer has accepted the documents; he must pay the full price of the goods. Furthermore, the buyer must take delivery of the goods at the agreed destination and has to bear all unloading costs.
According to the CIF contract, the buyer has only to pay any customs or other duties, which may impose in a CIF contract. For instance, payment of the freight is the buyers duty and also it is a condition of the contract.
In our task:
There was the CIF contract for the sale of a quantity of Columbian coffee beans, clause 6 of which is headed Period of shipment, and states:
As per bill(s) of lading dated or to be dated the bill(s) of lading to be dated when the goods are actually on board. Date of the bill(s) of lading shall be accepted as proof of date of shipment in the absence of evidence to the contrary
The original shipment period was extended for both contracts to include January 2007, but in the case of the contract considered in the appeal, later varied to allow the sellers the option of February shipment subject to a 3.57 % price allowance.

2) what does the presentation of the documents under the c.i.f. contract mean? What are the consequences of the failing by the seller his obligation to tender the right documents? CIF contract is that when the seller has delivered the goods or provides them afloat. He has to perform the contract by tendering conforming documents to the buyer. The significant feature of a CIF contract is that performance of bargain is to be fulfilled by delivery of documents and not by actual physical delivery of goods by the seller [4, p. 198].
CIF contract specifies the port of arrival.
Under CIF contract buyer has no right to inspect the goods before payment
obligation to pay upon presentation of the documents
buyer wanted to inspect prior to payment even though it was a CIF contract
Held for seller, the buyer is obligated to pay upon presentation of the documents
3) what is the nature of the bill of lading? What are the its conditions?
Bill of Lading as used herein includes conventional bills of lading, as well as electronic, express and laser bills of lading, sea waybills and all like documents, howsoever generated, covering the Carriage of Goods hereunder, whether or not issued to the Merchant.
In our task:
The bills of lading were dated 31st January 2007, although loading was not completed until 10th February. The buyers accepted and paid against the documents, and later resold the goods without prejudice in order to avoid further costs and expenses. Because the market had fallen, however, they obtained only 57% of the contract price. They claimed as damages from the sellers the difference between the contract price and the price obtained on the resale, although it was accepted that there was no great difference in the value of January and February goods. In effect, the buyers were attempting to shift the market fall back on to the sellers.
4) have the buyer the right to reject the documents and the goods? Have the buyer lost it in case of misdated bill of lading?
The buyers' refusal to pay the contract price upon presentation of shipping documents in a c.i.f. contract is a fundamental breach of contract, and where the sellers treat that refusal as a repudiation of the contract, their obligations under the contract cease so that the buyers have no right thereafter to reject the goods for not conforming to the contract description.
S and B contract on c.i.f. terms for the sale of Columbian coffee beans. This time, however, the contract provides, inter alia, that the goods are to be shipped during January. In fact the goods are not shipped until February but a bill of lading is issued dated January31st. Unfortunately, the buyer does not become aware of this until just before the goods arrive and in the meantime he has taken up and paid for the documents. Can the buyer reject the goods in such a case?
Prior to the enactment of s15A, the answer to this question was clearly, 'Yes'. It was established in Bowes v. Shand [5, p. 455] that stipulations as to the time of shipment form part of the description of the goods and that breach of such a stipulation entitled the buyer to reject even where the breach caused no loss. Does the enactment of s15A make any difference? It is probably the case that the Law Commission intended that section 15A should not apply to this situation and thus the law should remain unchanged. The Law Commission was clearly concerned about, what it perceived, to be the possibility of introducing uncertainty into this area of law and therefore indicated that, "any breach, however, slight, of [such a time clause] would give rise to a right to reject the goods and terminate of the contract."[6, p. 25] However, it is not clear that the provision actually achieves that effect.
On the assumption that breach of a stipulation as to the time of shipment is a breach of section 13 of the Sale of Goods Act, it is, at least prima facie, within s15A. Further, notwithstanding the views of the Law Commission, there may be good reasons for applying s15A to this situation. Once the buyer has taken up and paid for the documents, even if he did so in ignorance of his right to reject them, he has under English law lost his right to reject them. Arguments of commercial certainty may have great force in relation to the documents but do they still apply once the buyer has lost his right to reject the documents? It is suggested that while the right to reject the documents for trivial discrepancies may be justified because of short time limits, the interposition of banks in the process,[7, p. 62] the undesirability of making the buyer accept documents which may be difficult to sell, and the market conditions under which the parties are dealing, it is difficult to see why those arguments should apply with equal force, or at all, where the issue of the right to reject the goods arises. When the right to reject the goods is being considered banks are no longer involved and the time pressures are less. If the policy behind s15A of preventing rejection on unmeritorious grounds is to be supported it should surely apply just as much in this case as it did in the first. Rarely will there be any difference between the value of goods shipped on the last day of a month and the value of goods shipped a day or two later. If the seller can establish that that breach, objectively speaking, is so slight that the buyer should not be allowed to reject, then there are it is argued no good grounds for allowing the buyer to reject. Further, as was the case in the first example, applying section 15A to this situation is unlikely to lead to uncertainty. It might be objected that if an intermediate buyer in a string were to discover the documents were defective after he had accepted them but before he was able to sell them on he would effectively be stuck with unsaleable documents in circumstances where he might not be able to reject the goods. However, even if that did occur, the 'buyer' would still be able to resell the goods on arrival, albeit under a different description, and would presumably be able to recover any carrying costs in damages from the seller as well as any market loss caused by his loss of his right to reject the documents [8, p. 459]. The effect of interpreting section 15A in the way suggested should reduce the cases where a buyer seeks to reject goods on trivial grounds. The real reason why buyers seek to escape from their contract in this situation is that the market is falling. It does little credit to English law that until the enactment of section 15A it has allowed a buyer to do so.
In English law a c.i.f. buyer is entitled to reject a tender of the shipping documents either where they are 'defective' or where they are tendered late.[8, p. 57]. Documents may be defective for a number of reasons. For example, a non-genuine bill of lading has been held to be a defective document,[8, p. 57] as has a bill of lading which fails to provide the buyer with 'continuous documentary cover.[9, p. 3]. For a full treatment of a c.i.f. seller's obligations with regard to the documents see. In general, the seller's obligations with regard to the documents have been held to be strict. As Roskill L.J. said in The Hansa Nord, "The seller's obligation regarding documentation has long been made sacrosanct by the highest authority and ... the express or implied provisions in a c.i.f. contract in those respects [are] of the class ... any breach of which justified rejection."[10, p. 70] The sacrosanct nature of the documentary obligations can be demonstrated by the fact that a c.i.f. buyer can reject documents which disclose a defect in the goods even where that defect in the goods would not itself justify rejection of the goods.[10, p. 70]. Notwithstanding this apparently clear statement of principle is there any room for allowing documents which are 'nearly alright' in any case? Two possibilities will be considered. First, whether the common law admits of any exception to the general rule and, secondly, whether s15A applies to documentary breaches and if so to what effect.
So far as the common law is concerned, it appears that there may be an exception to the requirement that the documents must be in all respects perfect. The exact scope of that exception is, however, far from clear. In Tradax Internacional S.A. v. Goldschmidt S.A. sellers sold to the buyers 8,000 tonnes 5% more or less of White Syrian Barley on f.o.b. terms. The contract provided, inter alia, that the goods should contain no more than 4% foreign matters and that a certificate of quality had to be tendered with the other shipping documents. The sellers tendered the shipping documents to the buyers who rejected them on the ground that the certificate of quality showed 4.1% of foreign matters. It was conceded by the buyer that the provision as to impurities was not part of the description of the goods. Further, no condition implied by section 14 was relied on. Slynn L.J. held that the buyer was not entitled to reject the documents on this ground. In his opinion, the certificate was not a defective document; "But here the certificate is a good certificate in that it does state what is the quality, what is the percentage of impurities. It shows that there was not a full compliance with the contractual term as to quality and it does what it was intended to do. It is a valid document ... capable of being transferred as part of a subsequent sale."

The case is by no means an easy one and it is suggested that, particularly as a result of the enactment of s15A, it gives rise to a number of significant difficulties. Professor Treitel has explained the case in Benjamin as one where the certificate tendered was not a defective document.[11, p. 242]. A document, he argues, is not defective merely because it states that the goods contain a higher percentage of impurities than the contract allows for. It follows from this that the buyer cannot reject the documents merely because they disclose any defective condition of the goods. However, if the documents disclose a defect in the goods which amounts to a breach of condition (or a serious breach of an intermediate term) then the buyer can reject the documents for a defect in the goods; "the buyer is entitled to reject the documents, not because they are in themselves defective, but because they reveal a defect in the goods which justifies rejection of the goods."[12, p. 19] As it was conceded in the Tradax Internacional S.A. v. Goldschmidt S.A. [2, p. 105] case that the buyer could not reject the goods because no breach of a condition was alleged, the buyer clearly had no right to reject the documents. By way of contrast, in Vargas Pena Apeztieguia y Cia v. Peter Cremer G.m.b.H. [1987] 1 Lloyd's Rep 394 the buyer was entitled to reject documents which included a certificate of quality stating that the goods had a fat content in excess 15%. In that case, it was expressly provided in the contract that if a fat content of 15% was exceeded then the goods were 'rejectable at buyer's option'. The documents therefore disclosed a breach in the goods justifying their (i.e., the goods) rejection and therefore the buyer was entitled to reject the documents.
Prior to the enactment of s15A the approach taken in Tradax was unlikely to give rise to any particular difficulty. The enactment of s15A may, however, cause considerable difficulty. In order to see how, two further hypotheticals will be considered:

5) when does the passing of property take place under the CIF contract and who bears the risk of the loss or destruction of the goods what happens within the contemplation of the contract?
CIF contract is the most important contracts in the field of International Trade. Under the CIF contract, the parties have to deal with delivery of documents and not actual physical delivery of goods by the seller. CIF contract is in demand by companies in the field of International Trade.
So, under the CIF contract, the documents play a very important role. When the buyer has received the documents, he has a title on the goods. After receiving documents, he can demand to delivery of the goods at the port of the arrival and also can sue if there is any damage or loses in the goods. That is to say, the general presumption is that the property in goods pass to the buyer, when the documents is delivered to him, but the buyer, at the same time, has to do payment [13, p. 343].
Shortly, the buyer takes responsibilities from the seller which is the whole rights and liabilities in the commercial contract.
However, his responsibility occurs if only tendered documents such as the bill of lading, policy insurance, and the commercial invoice, are in conformity with the contract.
The essential feature of an ordinary CIF contract is that, performance of the bargain is to be fulfilled by delivery of documents and not by the physical delivery of the goods [14, p. 198].
Moreover, when the buyer received both the documents and the goods, he has a right o reject them. If the documents are not in conformity with the contract, he may reject them.
However, the seller has an opportunity to remedy the defect by a new and conforming tender of documents, if he has got enough time to do. Having accepted the documents, if the buyer found any nonconformity on the goods with the contract, he can still reject the goods.
Under the CIF contract, risk passes on shipment to the buyer while property in them passed [15, p. 600], or as from shipment.
This rule indicates two different methods of passing of risk under the CIF contract. First one is that, when the seller completed his contractual duty on CIF terms and delivered the goods on board the vessel, and then risk passes to the buyer on shipment. Second one is that, the seller bought the goods which are already afloat; he thereupon can make the goods subject of the contract with the buyer, then the risk passed as from shipment. In this sense, it can be said that risk passed before the shipment, because of the intention of the parties [16, p. 250].
Another important thing of the passing of risk is that when the seller delivered the goods on board the vessel, he has to give notice to the buyer, which the buyer may insure the goods during the sea transit. If he seller fails to notify him, the goods will be at his own risk during the sea transit [3, p. 32].

Under the Convention late shipment by the seller may be a breach of either Article 35(1) (In that the goods delivered do not conform with the contractual description) or 33.( In the sense that the goods were not delivered on the agreed date (article 33(a) or within the agreed period (art 33 (b)). In either case, article 49(1)(a) gives the buyer the right to declare the contract avoided only if the breach is fundamental. It is suggested that the points made in relation to the first hypothetical in relation to the Convention would apply with equal force here. Thus, the buyer would only be able to reject where the late shipment was sufficiently late to deprive him of substantially that which he was entitled to expect under the contract. For the reasons given above, therefore, a court applying the Vienna Convention is unlikely to reach a radically different solution to a court applying English law.
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