Name- Yuvanshi Kulshreshtha

Roll No.: 2017BALLB004

Course- B.A. LL.B. (Hons.) VIII Semester

International Trade law Assignment

Q1. Explain the relevance of CIF, FOB, and C&F Contract and highlight the difference
between the three.

Ans1. When it comes to international trading, there are a couple of things you should know. All
goods and services, including cars, are subject to different regulations. If you don't have
experience with this, it may be a bit confusing to understand at first. For that reason, we decided
to show you some of the most important agreements and explain how they work.

What Are International Commerce Terms?

The International Chamber of Commerce (ICC) created a set of different terms, known as
Incoterms. CIF, C&F, and FOB are among the Incoterms Rules for Sea and Inland Waterway.
Each of these represents a specific agreement between the buyer and the seller, which divides the
costs and responsibilities between them.

CIF
A Cost, Insurance, and Freight (CIF) agreement states that the seller has a higher responsibility
than the buyer in terms of delivery. The seller takes responsibility for shipping arrangements, as
well as the transport costs, and delivers the goods to the buyer's destination port of choice. From
that point, the buyer assumes the responsibilities, costs, and risks.

This agreement also covers the matter of insurance. The seller covers the minimum marine
insurance costs, with the amount being discussed by the buyer and the seller.

Although this sounds compelling, keep in mind that this is one of the more expensive options.
Since your cargo is your responsibility from the moment it reaches the port, you may have to pay
additional fees, like custom clearance fees and docking fees. You also have no control over the
transportation process, since the seller arranges it.
Despite this, CIF is often the most common choice among new importers, since it's a very
convenient option. The seller takes care of pretty much everything, so you wouldn't have to deal
with complex details.

C&F
Cost and Freight (C&F), commonly referred to as CFR or CNF, is very similar to CIF. The only
difference is that the seller doesn't cover the insurance. To explain how C&F works, here's an
example:

Let's say you're a buyer in Los Angeles and you decided to import goods from China. The seller
agrees to carry the goods to a port in China and pays all fees related to loading the goods onto the
vessel. The seller chooses the ship himself and cover the freight costs.

When the cargo reaches the LA port, you assume all the costs. You pay the clearance free, as
well as the insurance, since in this case it's not the seller's responsibility.

FOB
Free on Board, or Freight on Board (FOB) determines from which point the cost and
responsibilities are transferred from the seller to the buyer. There are four different types of
FOB:
- FOB (port of origin), Freight Collect
- FOB (port of origin), Freight Prepaid
- FOB (port of destination), Freight Collect
- FOB (port of destination), Freight Prepaid

The first part determines the place from which point onward the buyer assumes the risks and
responsibilities. The second part determines the freight charges. 'Collect' means that the
payments falls under buyer's responsibility, while 'Prepaid' means that the seller makes the
payment.

There are two main reasons to consider FOB over CIF or C&F. The first reason is that you have
much more control over the freight costs and the freight itself. The second reason is the price.
Your freight forwarder can help you find a fair freight rate and give you all the necessary
information about the process.
There is one thing to keep in mind when it comes to FOB, and that is the risk of receiving
damaged goods. In some cases, if you're a buyer, the goods belong to you the moment they are
shipped. If you receive damage goods, the seller is under no legal obligation to take them back,
so always make sure to understand the terms of shipment.

Q2. Illustrate through case laws, on how the CIF contract functions in International
Trade.

Ans.2 A CIF contract requires the vendor to ship at the port of shipment the agreed goods in the
underlying contract of sale, to procure a contract of carriage (bill of lading) under which the
goods will be delivered to the agreed destination, to arrange for insurance which will be available
for the benefit of the purchaser, to make out a commercial invoice and finally to tender these
documents to the buyer who must be ready and willing to pay the price of the shipped goods. In
such a case, the title of the goods may pass either on shipment or on tender of the documents.
The risk generally passes on shipments or as from shipments, but possession does not pass until
the documents which represent the goods are handed over in exchange for the price.  As a result,
the buyer, after receipt of the documents, can claim against the carrier for breach of the contract
of carriage and against the underwriter for any loss covered by the policy.

English case law, which forms the basis for many international shipping contracts, has
established that it is irrelevant whether both buyer and seller knew of the loss of the ship before
the latter tendered the documents; the buyer must pay the price. Hence, the vendor can tender the
documents even though he possesses, at the time of tender, actual knowledge of the loss of the
ship or the goods. Consequently, in the event of loss, the purchaser will receive the documents
rather than the goods for which he contracted. Even if the purchaser had already paid the price,
he cannot demand its return. In addition, a vendor under a CIF contract for the sale of goods who
has shipped the agreed goods under a clean bill of lading and obtained the proper documents, can
tender those documents to the purchaser notwithstanding he knows at the time of such tender of
the loss of the goods.

In a CIF contract, the documents which must be tendered by the vendor to the purchaser will
include a bill of lading. However, the contract may stipulate for tender of a delivery order or give
the vendor the option of tendering a delivery order. It has been recognised, since the English case
of Re Denbigh Cowan & Co and R Atcherley & Co [1921] 90 LJKB 836, that the mere
substitution of a delivery order for a bill of lading under the terms of the contracts does not
impart any obligation to deliver the actual goods, so as to prevent the contract from being a true
CIF contract. Nevertheless, in another English case, The Julia [1949] AC 293, a contract for the
sale of rye ‘CIF Antwerp’ gave the seller the option of tendering bills of lading or delivery
orders. The seller shipped the rye in bulk and tendered a delivery order in respect of a quantity
smaller than the entire shipment. This order was directed to the seller’s agent in Antwerp.
Accordingly, it was held that the contract was not a CIF contract but one for the delivery of the
goods in Antwerp. As the goods were not so delivered, there was a total failure of consideration.
Here it can be said that if the seller in the Julia case had chosen to tender a bill of lading, he
would have performed his obligations and it would have been a CIF contract.