CIF CONTRACT – simply a sale of document?

It is commonly said that a CIF contract is nothing more than a sale of documents, as the goods can be paid for and sold on the strength of the documents.

According to Scrutton J, “….…CIF sale is not a sale of goods but a sale of documents relating to goods. It is not a contract that goods shall arrive, but a contract to ship goods complying with the contract of sale, to obtain, unless the contract otherwise provides, the ordinary contract of carriage to the place of destination, and the ordinary contract of insurance of the goods on that voyage, and to tender these documents against payment of the contract price….....”(Arnhold Karberg v Blythe, Green, Jourdain and Co)[1916]2KB379.

However, the above statement was expressly rejected by Bankas and Warrington LJJ in the Court of Appeal. They described CIF contract as a contract for the sale of goods to be performed by the delivery of documents.

Although  Scrutton J’s statement got some valid points; for instance the buyer’s obligation to pay against the tender of documents, and the right to reject a bad tender of documents suggest that documents do play an importand role in CIF contracts. The CIF contract is still a contract for sale of goods rather than a sale of documents. As stated by the Court of Appeal in Arnhold Karberg v Blythe[1916]1 KB 495, a CIF contract is a sale of goods that is performed by the delivery of the documents.

Moreover the sellers obligations in a CIF contract in respect of goods and tender of documents covering the goods was reiterated in Hindley and Co Ltd v East Indian Produce Co Ltd[1973]2 Lloyd’s Rep 515. In this case the seller bought goods from a third party tendered the bill of lading(obtained from the third party) to the buyers. On arrival, it was found that no goods had been shipped. The sellers argued that they were not liable since a sale on CIF contract was a sale of documents and performance took place with delivery of the documents. Kerr J stated that it is an oversimplification to perceive a CIF contract as a sale of documents. It is instead a contract for the sale of goods to be performed by the delivery of documents. It was held that the seller did not performed his obligation properly.

Although CIF contract seems to be a sale of document but it is a contract for the sale of goods to be performed by the delivery of documents.

 I Carr,International Trade Law,4^th edn, Routledge-Cavendish publication.

J Katalikawe,Law of International Trade, 5^th edn, OBP.

P Todd, International Trade Law, Sweet and Maxwell limited.