Buyers still need to look shipment date
Understandably, where a CIF/CFR contract provides for an arrival period, it is often assumed that the vessel must arrive at the discharge port within that time. However, it is not normally as simple as that. Instead, the provision for an arrival period usually only means that the seller is obliged to ship the goods in order to ensure that, in the ordinary course of events, the vessel will arrive at the discharge port within that period.
The buyer must therefore still keep a close eye on the shipment date for the goods in order to act promptly on any breach by the seller and, equally, in order to avoid wrongfully rejecting the goods if the vessel arrives after the expiry of the arrival period due to circumstances beyond the seller's control.
The arrival period
Without anything more, the provision for an arrival period in a CIF contract usually means that the seller has to ship the goods in sufficient time to ensure that, in the ordinary course of events, the vessel can be expected to arrive at the discharge port within the arrival period.
For instance, the CIF contract in The “Wise” [1989] 1 Lloyd's Rep. 96 provided for “Arrival: March 15 – 30”. This meant that the buyer was not entitled to reject the goods where they had been shipped in time to arrive during that period but had only arrived late after the vessel was hit by a missile.
An arrival period in a CIF contract is usually interpreted in this way because, traditionally, such contracts only specify the period within which goods are to be shipped or documents tendered, and the seller is assumed not to give an undertaking as to arrival.
This position is also broadly reflected in certain standard contract terms. For instance, under Section 11.3 of the BP GTCs, where a CIF contract does not specify a shipment period but does give an arrival period (or an “Indicate Discharge Date”), the seller must ensure that “the Vessel has tendered NOR at the Loading Terminal at a time consistent with arrival at the Discharge Terminal within the Indicative Discharge Date, given a reasonable assessment of the customary loading and voyage time”. The seller also “shall not assume any responsibility for the delivery of the Crude Oil or Product at the Discharge Terminal”.
Similarly, Rules 7(ii) and 7(iv) of the Refined Sugar Association Rules provide: “Where the contract delivery period is a period for arrival, shipment must be effected to ensure that, in the ordinary course of events, the sugar will arrive at the port of discharge within the contract delivery period.” Rules 110(b), 407(ii), and 407(iv) of the Sugar Association of London Rules also have the same effect.
When is the seller in breach?
Where a CIF contract provides simply for an arrival period, the buyer must therefore still be mindful of the shipment date.
If the seller does not ship the goods in sufficient time to ensure that, in the ordinary course of events, the vessel could be expected to arrive at the discharge port within the arrival period, the buyer may have to act promptly if it wishes to act on such a breach. Otherwise, if the buyer does not act promptly and continues to perform the contract, it could risk waiving its right to reject the goods.
Equally, the buyer should be wary of rejecting goods simply because the vessel arrives at the discharge port after the end of the arrival period. If the seller ships the goods in sufficient time to meet the arrival period, it would not be in breach if the vessel only arrives after the end of that period due to unexpected circumstances on route. The buyer's wrongful rejection of the goods due to late arrival could then itself be a repudiatory breach that entitles the seller to terminate and claim damages.
Guaranteed arrival
Nevertheless, whether or not a CIF seller guarantees that goods will arrive at the discharge port by a specified time is ultimately a matter of interpretation.
For instance, in The Jambur LMLN 289 [1990], the CIF contract provided for delivery “Latest by 30 April 1990, c.i.f. basis one safe berth/port Kaohsiung, Taiwan, as full cargo per mt “Jambur”, which sailed from Constanza 1000 am 28 March 1990”. The Court held that this meant that the seller was obliged to physically deliver at the discharge port by 30 April. That was because the cargo had already been shipped prior to the conclusion of the contract and the wording was emphatic in guaranteeing physical delivery by a particular date.
Comment
With the right drafting, it is therefore possible for a CIF buyer to oblige a seller to make physical delivery at the discharge port by a specified deadline. If a buyer wishes to ensure this, they will also need to ensure that such a guarantee supersedes any standard terms to the contrary (e.g. those identified above under the BP GTCs and Sugar Rules).
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.