The cif, as well fob, is one of the most common sale contract forms in nowadays trade, probably morethan any other contract used for the purpose of seaborne commerce it is relatively a recent type of contract in the lex mercatoria, which appears in the middle of the 1800 and it has increasingly spread in the mercantile. The international sale of goods and incoterms from a. The seller and the buyer both agree to finalize this contract under the terms and conditions. Cif contract is that when the seller has delivered the goods or provides them afloat. Under fob sales, legal title transfers when the goods pass over the ships rail and the customer is. Cif contracts are different from other incoterms especially from fob free on board in certain respects. A good rule of thumb when doing business in international trade is that you should buy fob and sell cif. Difference between fob and cif compare the difference. Our word of the day is fob free on board the fob abbreviation is an importexport term relating to.
The fob free on board and cif cost, insurance and freight contracts are involved with international export sale contracts also called. He has to perform the contract by tendering conforming documents to the buyer. The work is a thorough and detailed study of this important area of commercial law, focusing on both providing clear and exhaustive guidance on the. The product shall be delivered by the seller to the buyer in bulk free on board fob, vessels to be provided or procured by the buyer at. The significant feature of a cif contract is that performance of bargain is to be fulfilled by.
These terms defines the responsibilities of both the buyer and seller in the various transportation options. Fob contracts relieve the seller of responsibility once the goods are shipped. May, 2017 cif contracts 1introduction an international cif contract is the preeminent international sale contract on shipment terms. The sellers obligations are fulfilled when the goods have passed over the ships rail at the port of shipment. Sales contracts in the mining sector commonly refer to the inco terms, with fob free on board and cif carriage, insurance and freight being two of the most common types. One rule of the 2010 version delivered at terminal. These incoterms mainly apply to bulk cargo and oversized items that are transported by sea freight or. The contracts list, reflecting the current versions is set out in summary form below. Free on board fob is a trade term that indicates whether the seller or the buyer has liability for goods that are damaged or destroyed during shipment between the two. Contracts dealing with goods to be shipped often include an fob clause, which stands for free on board. The international sale of goods and incoterms from a maritime. Fob free on board port of shipment incoterms 2020 explained. In such cases it is then up to the seller and buyer to agree in their contract on what they mean when they use these three letters. This latest edition of a wellknown work on cif and fob contracts is a welcome addition to the literature on the english law of international sale of goods.
Dat was removed, and is replaced by a new rule delivered at place unloaded. Difference between cif and fob contracts business law. Its use would be fob where would be the city or place where the goods would be left. Feb 27, 2020 cost, insurance, and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. The coffee trade uses four basic contract conditions. Cost, insurance and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. The seller performs his contract by delivering the relevant. A basic description of two different fob contracts. Cif contracts international sale of goods 08 22340 studocu. Incoterms 2020 defines 11 rules, the same number as defined by incoterms 2010.
This term is only used for water transportation either sea or inland water. Nov 16, 2016 international contracts typically contain shorthand terms incoterms describing when the risk of loss transfers from a seller to a buyer. Free on board, although variations of these terms of export contract. Both the fob and cif contracts are both very important contract under the international commercial law. One of the distinct feature of cif contracts is that the buyer is required to pay against the tender of documents listed in the sale. Subject to the terms of the contract, the sellers physical duties lie in the description, quality and fitness of the goods shipped. Gta fob contract no 1 grain and oilseeds in bulk gta july 2015 page 3. They outline the agreement between a buyer and seller when it comes to transporting goods between them. According to case smyth and co ltd v baily son and co ltd, cif contracts summarised by lord wright is a type of contracts which is more frequent and the most popular in use than other contract. Cif and fob contracts 6e thomson reuters australia. Edited by f lorenzon, senior lecturer, university of southampton, and others.
This means that the goods will be shipped to a specific place without cost. The risk of loss of or damage to the goods passes when the products are alongside the ship. These terms have been put in place so as to maintain uniformity, certainty and predictability in. An examination of their principles and practical application in internal trade by john williamson introduction this article is a brief study ofvarious legal aspects and practices of international trade.
Understanding the correct point of delivery in cif incoterms. It stands for cost, insurance and freight which effectively describes. The fob terms are an important part of the purchase contract. Best pdf cif and fob contracts british shipping law library for ipad by david m. The ma in d ifferences between cif and fob contracts under engl ish law cif contract is that when the seller has delivered the goods or provides them afloat. Nov 29, 2017 incoterms they would also indicate what is the incoterm rules to be used. A simple definition of the term fob contract was provided by lord brougham in the case of cowasjee v thompson. Whether drafting contracts or considering the nature of these provisions in the context of a dispute, sassoon offers an easytouse reference to the principles behind cif cost insurance freight and fob free on board contracts.
When you sell cif you can make a slightly higher profit and when you buy fob you can save on costs. To conclude, cif and fob contracts are the most important contracts in the field of international trade. Cost, insurance, and freight cif and free on board fob are. A type of contract for the international sale of goods by which the seller agrees not only to supply the goods but also to make a contract of carriage with a sea carrier, under which the goods will be delivered at the contract port of destination, and a contract of insurance with an insurer, to cover them while they are in transit. The seller delivers when the goods are placed alongside the vessel e. Cif and fob contracts goods in transit are a target for opportunists and thieves. It is the duty of the seller to clear the goods for export, and the cost as well as risk. May 18, 2010 in this case study, patina is the seller and luca is the buyer under an fob free on board agreement. There are two main types of sales contracts used in buyerseller business engagements. This means that the seller is providing a price which includes the cost of the goods, the insurance of the goods for their journey to their destination portunloading point, and the cost of the ocean freight or whichever method of freight is being used to transport the goods to the buyer. Fob and cif are terms that youll come across often in international shipping. This lecture paper explore in succinct the obligations of seller and buyer under c. Incoterms 2020 is the ninth set of predefined international contract terms published by the international chamber of commerce, with the first set having been published in 1936.
He has to perform the contract by tendering conforming documents to the. Free alongside ship fas free on board fob cost and freight cfr cost insurance and freight cif home. The essence of the cif contract law contract essay. By using fob the seller must clear the goods for export and delivers when the goods pass the ships rail at the agreed port. Incoterms 2020 used for import export global trade.
Learn vocabulary, terms, and more with flashcards, games, and other study tools. Incoterms as a form of standardisation in international. These terms have been put in place so as to maintain uniformity, certainty and predictability in international trade agreements. Incoterms envisages different rights and obligations for buyers and sellers. Free on board fob is a shipment term used to indicate whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping. In a cif agreement, the seller sells the good for a price including the cost, insurance and freight. In this case study, patina is the seller and luca is the buyer under an fob free on board agreement. However, cif contract has a very significant difference from fob contract. One of the distinct feature of cif contracts is that the buyer. The seller must pay the costs and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods, as well as any. Critically analyse this statement in relation to c.
Buyers are allowed to substitute the nominated vessels provided that i the substitute vessel is able to load the same nominated quantity within. Contract law free on board fob cif 1534 words bartleby. Critically assess the rules on risk in relation to cif and fob contracts. Passing of property between the seller and the buyer in c. Apr 24, 2018 cost, insurance and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. Covers the following for each of the cif and fob contracts. Cif and fob contracts bill of lading private law scribd. The distinction between cif cost, insurance and freight and fob free on board contracts is well recognized in the commercial world. Cif and fob contracts explains and analyses the law of contracts for the sale of goods carried by sea, in particular the cost, insurance and freight cif and free on board fob terms. Gta fob contract no 1 contract for grain and oilseeds in bulk. Publications available for purchase from cif for more information contact cif reception on 01 406 6000. The cif, as well fob, is one of the most common sale contract forms in nowadays trade, probably morethan any other contract used for the purpose of seaborne commerce. There are 11 incoterm rules in the current incoterms 2010 published by the international chamber of commerce.
Fob stands for free on board, and is a contract between the buyer and seller, where the seller has to load the goods himself on a vessel that has been nominated by the buyer. Shipment contract a type of salespurchase contract under which the sellers responsibility ends when the contract goods have been handed over to a carrier i. The international sale of goods and incoterms from a maritime lawyers perspective incoterms are terms published by the international chamber of commerce icc, dealing with aspects of the sales contract such as. The seller meets cost of goods, freight and marine insurance. Fob, cif or cfr, fot and fca, of which the first two are most common. What is difference between fob and cif in contract law. This writer has often been informed by a client that a dispute concerns a cif contract or an fob contract without any full understanding by the client of what the term. The international sale of goods and incoterms from a maritime lawyers perspective. It is surprising that any exporter of goods would want to contract under cif terms. Chapter 3 laytime and demurrage in cif and fob contracts. Cost, insurance and freight cif and free on board fob. Basic overview of the incoterms 2020 rules 2 rules for any mode or modes of transport seller buyer exw ex works insert named place of delivery incoterms 2020. Contract law free on board fob cif essay 1547 words.
The distinction between an extended fob and a cif contract is that in the extended fob contract, services connected with the provision of the vessel and prepayment of freight and insurance must be treated as having been provided on account of the buyer. Cost, insurance, and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. The buyer bears all costs from that moment onwards. They are among the most common of the 12 international commerce terms incoterms established by the international chamber of commerce icc in 1936. The cif seller or fob buyer who charters a vessel to fulfil its. Cost, insurance and freight cif contracts law times journal. In cif contracts the price of goods inclusive of cost, insurance and freight.
Oct 05, 2015 welcome to the investors trading academy talking glossary of financial terms and events. Contracts fob law and legal definition uslegal, inc. And when property and risk pass in these transactions find, read and cite all the research. Under cif which belongs to incoterms group c main carriage paid, the seller nominates the vessel and pays the cost and freight to bring the goods right to port of destination. Cif contracts are more detailed and the performance of the contract needs to be done by fulfillment of many specified conditions, delivery of documents to the buyer thus the fob contracts are more flexible than of the cif contracts or more free. Unless otherwise expressly agreed in writing in the sales contract, this part one of these general terms and conditions shall apply only to all fob sales of products to be performed as sellers, either by cepsa trading, s. Fobst free on board stowed and trimmed for free on road. Includes express references to the most common standard form contracts in current use such as the gafta 2010 edn, and fosfa 2008 edn c. The price includes all the expenses incurred until goods are actually loaded on board the ship at port of shipment. Request pdf on jan 1, 2018, ufuo asanwana and others published understanding fob and cif contracts.
Covers in full the cif and fob incoterms 2010 rules often incorporated by reference in shipment sales of commodities and manufactured goods. Fob and cif are the two most popular price terms of the inco terms. Cost, insurance, and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a. B contracts and further the focus will be on the legal perspective and the roles of the shipping documents in c. Cif and fob contracts 5th edition by lorenzon, filippo, skajaa, lynne, baatz, yvonne, sassoon, david m. Gta fob contract no 1 grain and oilseeds in bulk gta july 2015 page 4 the sellers may send the cargo alongside continuously saturday, sundays and holidays included and if the sellers so direct the buyers must procure that the vessel loads continuously saturdays, sundays and holidays included. Everyday low prices and free delivery on eligible orders. Page 35 chapter 3 laytime and demurrage in cif and fob contracts laytime and demurrage in cif and fob contracts professor simon baughen 1 laytime and demurrage provisions are not the exclusive province of voyage charters. Unlimited read and download cif and fob contracts british. Fob free on board is a delivery term used in international contract with maritime element. The flexibility of the free on board fob contract makes it a far more attractive international sales contract option for exporters than the cif.