International Sales Contracts & Carriage of Goods by Sea Essay

International Sales Contracts & Carriage of Goods by Sea - Essay Example This essay will dwell on two terms of sale: the CIF and FOB. It will discuss their distinction and how Incoterms 2010 affected these terms of sale. It will attempt to find out which of these two terms is viable to the 21st century traders. C.I.F and F.O.B : Their Distinct Characteristic and how they work The terms C.I.F. and F.O.B are two abridged business terms. Both are used in international trade covered by carriage of goods by sea. The term C.I.F is an abbreviation of Cost, Insurance and Freight. If the Contract of Carriage contains price quotation on C.I.F, it presupposes that the seller will shoulder the payment of cost of crating and packaging, insurance and the freightage. Here, the carrier is considered an agent of the seller. The ownership of the goods is retained by the seller throughout the trip and passes to the buyer upon reaching the point of destination and the cargo is discharged in favor of the buyer.1 C.I.F requires the seller of the goods to arrange for the carria ge of goods by sea to a port of destination and provide the buyer the documents necessary to obtain the cargo from the carrier. 2 According to Villanueva the insurable interest is with the seller and the taxes are not due as the sale is deemed perfected only upon reaching point of destination.3 One of the significant features of a CIF contract lies in the performance of the bargain, which is to be fulfilled by the delivery of documents and not by actual physical delivery of goods or shipment by the seller according to the case of Manbre S. Co. Ltd. v Corn p. Co. Ltd. 4 The Term F.O. B. is the abbreviation of the terms of sale Free On Board. Here, if the contract of carriage contains price quotation with FOB, the seller is presumed to comply with the obligation to deliver the goods to the vessel. The one responsible for payment of the freightage is the buyer and the vessel or carrier is an agent of the buyer. Hence, delivery to the carrier is delivery to the buyer. Under this term, t he buyer acquires ownership over the goods upon delivery by the seller to the carrier. The buyer here now has insurable interest and the sale has been considered perfected upon delivery to the vessel.5 The term FOB, which is one of the popular commercial terms, is commonly used and misused. Though frequently used to describe inland movement of cargo, it is specifically refers to ocean or inland waterway transportation of goods. 6 In both CIF and FOB, there is intervention of the carrier. Both terms also use bill of lading, which is a document of title that denotes ownership of cargo or goods, which can only be transferred by endorsement. The carrier issues this document whenever the carrier ships merchandise, goods or cargo. 7 Responsibilities and Duties in CIF and FOB Contacts Compared One of the differences between the CIF Contracts and FOB Contracts lies in the following areas: In CIF, the insurable interest is with the seller while in FOB, the insurable interest is with the buye r. Another important difference between FOB and CIF contract is that, FOB contract specifies the port of loading, however CIF contract specifies the port of arrival.8 The difference between the two terms of sale pertains to the rights and duties of the seller and buyer. The primary duty of the seller in FOB contract is loading. 9 And the buyer specifies the vessel on a port nominated by the buyer and on which the goods are to be