THE MAIN DIFFERENCES BETWEEN CIF AND FOB CONTRACTS UNDER ENGLISH LAW

Topics: Contract law, Contract, Bill of lading Pages: 6 (2001 words) Published: April 19, 2015
THE

MAİN

DİFFERENCES

BETWEEN

CIF

AND

FOB

CONTRACTS UNDER ENGLİSH LAW
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.

1

2

FOB contract can be described as a flexible instrument. Because, the buyer has to nominate a ship and the seller has to put the goods on board of vessel for account of the buyer and procuring a bill of lading.

The important differences between FOB and CIF contract is that, FOB contract specifies the port of loading, however CIF contract specifies the port of arrival.

A)

The Right and Duties of Seller and Buyer

Seller’s Rights and Duties
1.The main duty of the seller under the FOB contract is loading. The seller must deliver the goods on board the vessel, at a place where the buyer has already identified as the port of loading and within the period of shipment which the parties indicated in the contract of sale. Name of the port in a FOB contract is a condition.

For instance, the seller sends the goods to the other port from the port where it has been identified in the contract of sale. The seller commits a breach of a condition, so the buyer is entitled to refuse the delivery of the goods.1

1
2

Manbre S. Co. Ltd. v Corn p. Co. Ltd. [1915] 1 KB 198
Wimble ,Sons&co v Rosenburg& sons [1913] 3 KB 743

1

Under the CIF contact, the seller is required to deliver the goods on board of the vessel at the agreed port of delivery. However, in contrast to an FOB contract, the seller can also procure the goods afloat which are already shipped.

2. Under the FOB contract, the seller has to bear all cost such as the payment of handling, transferring the goods to the ship and loading. Furthermore the seller has to make all necessary arrangements for the buyer’s account such as making a contract of carriage by sea and insuring the goods under an insurance contract. Moreover, the seller is not responsible to pay the freight and cannot be force to provide “freight pre-paid bill of lading” from the carrier. This is because; the contract of carriage and the freight are made between the carrier and the buyer.

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 seller’s 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 contract2.

3. 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.”3 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 seller’s responsibility to provide an export licence.

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Petrograde Inc. v Stinnes G. [1995] 1 Lloyd’s Rep.142.
Hickox v Adams [1876] 34 L.T.404.
3
Brandt & co. v Morris &co. Ltd. [1917] 2 K.B. 784
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4. Under the FOB contract, unless otherwise agreed, the seller has to provide the documents such as bills of lading, which is necessary for the buyer to obtain a possession of the goods. These documents have to deliver to the buyer in return for payment. Compared with the FOB contract, CIF seller has to provide a commercial invoice in order to get a payment. These documents must include the...
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