CIF contracts include cost, insurance and freight. A CIF
contract is a type of contract which is more widely and more
frequently in use than any other contract used for the purposes of
seaborne commerce. An enormous number of transactions, in value
amounting to untold sums, are carried out every year under CIF
contracts. Hence, due to the importance of the CIF contract with
regard to international sales contracts by sea, I will try to
briefly summarize the nature of CIF contracts.
Under CIF contracts, the seller charges an inclusive price
covering the cost of the goods, freight and insurance. Therefore,
the obligations of the vendor under CIF contracts can be summarized
as follows: Firstly to ship from the port of shipment the
contracted goods; secondly to procure a contract of affreightment,
under which the goods will be delivered at the agreed destination;
thirdly to arrange for insurance which will be available for the
benefit of the buyer; fourthly to make out commercial invoices; and
finally to tender these documents to the buyer. It follows that
against tender of these documents the buyer should be ready and
willing to pay the price. Moreover, if goods that are shipped in
order are lost or damaged in transit, the buyer's remedy might
also be against the carrier and insurer, by virtue of the contracts
of carriage and insurance taken out by the seller for the benefit
of the buyer.
One could state that the seller under a CIF contract is obliged
to prepare for the carriage of goods; and that insurance in transit
should be included in the contract price. Hence, the seller obtains
a bill of lading, an insurance policy and commercial invoice and
then transfers such documents to the buyer, who is obliged to pay
It has been argued however; that the CIF contract is not a sale
of goods but a sale of documents relating to goods. This argument
states that the performance of the contract is fulfilled by
delivery of the documents and not by the actual delivery of goods
by the vendor. If the ship and the goods have been lost after
shipment there is no reason for refusing to accept and pay for the
documents. Moreover, it has been argued that non- existence of an
insurance policy is a ground for rejection of the documents
notwithstanding the goods arrived safely at the port of
These arguments of course, can be rebutted, by saying that a CIF
contract is a sale of goods contract since the Sale of Goods Act
applies to it. Furthermore, even if the buyer under a CIF accepted
the documents before the actual arrival of the goods, it can reject
the goods when they arrive if the buyer finds that the goods are
not conforming to the requirements of the contract.
In conclusion, although documents are a crucial part of CIF
contracts, this does not constitute CIF contracts as money against
documents contracts rather than money against goods contracts.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The Merchant Shipping (Fees and Taxing Provisions) Law provides that, in order to qualify for the tonnage tax scheme, EU-flagged ships (ships lawfully registered in and flying the flag of an EU member state or any other contracting party to the European Economic Area Agreement) must account for a specified minimum percentage of the taxpayer's fleet.
The Cypriot merchant fleet ranks among the 10 largest fleets in
the world and ranks third in the European Union, with 12 per cent
of the total fleet of the 27 Member States of the EU. It has 1,857
ocean-going vessels of a GT exceeding 21 million.
Erik Muthow and Prabhat Misra give a broad overview of how the vessel mortgage process, and relevant laws, work in the UAE and highlight areas where lenders and ship owners should be mindful of when electing to finance a UAE flagged vessel.
The Maltese Government has just published Regulation 384 of 2003 under the Value Added Tax Act whereby, prior to Malta’s accession to the European Union in 2004, it will temporarily allow the registration of yachts under the Maltese flag with the added bonus of paying VAT at only 5%.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”