Cost insurance freight(FIC)

• This is one of the most popular of the terms used in international sale contracts
where sea carriage is envisaged. E.g in the case of Lord Wreight in Ross T Smyth
&co.ltd v TD Bailey, son & co [1940]3 ALL ER 60
• A CIF contract is a contract to supply the goods that comply with the contract of
the sale and to obtain a contract a contract for carriage and a contract of insurance
Standardization in international trade
• Is the process of creating protocols to guide the creation of a good or
service based on the consensus of all the relevant parties in the
industry
• terms of trade are defined as the ratio between the index of export
prices and the index of import prices
• If the export prices increases more than the import prices, a country
has positive terms to trade as for the same amount of exports, it can
purchase more imports
Examples of terms of trade
• Net barter
• Gross barter
• Income terms of trade
• Single factorial terms of trade
• Double factorial
• Real cost terms of trade
• Utility terms of trade
Is a CIF contract simply a sale of
documents ?
• In the case of Arnold Karberg &co v Bythe [1916]2 KB 379
• Hindley & co ltd v East indian produce co ltd [1973] liod’s rep 515
Duties of a seller under the a CIF contract
• Shipping of the goods as per the contract description
• Duty to procurer and prepare the shipment documents
• The seller must obtain the insurance cover and tender the insurance
documents to the buyer
• In the case of Lindon Tricotagefabrik v white &Meacham [1975]1
Tender of documents
• The seller under the CIF contract is under the obligation to tender the
documents specified in the contract of sale.
• In the absence of express stipulation the seller must tender the
following documents;
(a) a bill of lading
(b) an insurance policy
(c) documents required by the custom and an invoice
• Where the seller’s tender is a bad tender, it may be possible for him
to retender provided it is within the time limit set.
When must the documents be tendered ?
• In the absence of express stipulation regarding the time for tender of
documents to the buyer , the courts will apply that the seller must
take all reasonable measures to tender them to the buyer
• If a seller has received documents e.g bills of lading, then he must
tender these as soon as he has received them
• If a seller holds onto these documents for a length of time after their
receipt then his behavior will be deemed un reasonable
Passing of property in cost insurance freight
• a property could pass when goods are placed on board the ship
• Property could pass upon the transfer of documents to the buyer and
payment of the price by the buyer to the seller
• The property could pass on tender of bill of lading even though the
buyer has not paid for the goods since the seller has agreed to give
the credit to the buyer
Passing of risk
• unlike in sale of goods risk passes along with property, in cif contracts
risk passes on shipment where as property normally passes much
later after the tender of documents.
Duties of the buyer
• Payment against documents
• Buyer to name the port of destination
• Buyer to take delivery
• Import linces
Buyer’s remedies
• Right of rejection.
• Damages for failure to tender valid documents or deliver goods
• Damages for late shipment and late tender
• Damages for defective goods.