C.I.F
INTRODUCTION

THE c.i.f. contract is a comparative newcomer among the institutions' of the law merchant. Firmly established today as “an indispensable instrument of overseas trade,” its use in trans-actions involving the sale and shipment of goods from one country to another is the rule rather than the exception. Few customs of merchants have had more far-reaching consequences on the con-duct of international commerce, or have played a more important part in the shaping of mercantile practice. The achievement how-ever has been largely one of the present century; for although the broad outlines of the contract have been familiar to merchants and to commercial lawyers for a much longer period, In Couturier v. Hastie, 8 Ex. 40 (I852), a contract for the sale of corn provided that it was to be shipped " free on board, and including freight and insurance to a safe port in the United Kingdom." In Ireland v. Livingston, L. R. 5 H. L. 395, 406 (1872), Blackburn, J., observed that " The terms at a price, 'to cover cost, freight, and insurance, payment by acceptance on receiving shipping documents,' are very usual, and are perfectly well understood in practice." One of the earliest French cases involving a c.i.f. contract appears to have been Ouvry c. England et Cie., 1862 Havre 2.255 (Imperial Court of Rouen). it remained for the tremendous world developments of the last thirty years to bring out its latent possibilities. Only since the first world war have problems arising from the use of such contracts engaged the attention of legal writers in the great commercial countries.

The words 'C.I.F.' stand for cost, insurance and freight. A CIF contract is a type of contract wherein the price includes cost, insurance and freight charges. Under a CIF contract the seller is required to insure the goods, deliver them to the shipping company, arrange for their affreightment and send the bill of lading and insurance policy together with the invoice and a certificate of origin to a bank. The documents are usually delivered by the bank against payment of seller since he continues to be the owner of goods until the buyer pays for them and obtains the documents. The property in the goods passes to the buyer on the delivery of documents. The buyer is equally protected as he is called upon to pay only against the documents and the moment he pays, he obtains the documents, which enable him to get delivery of the goods. If in the meantime the goods are lost neither the buyer nor the seller is put to loss, whoever is the owner at the time of the loss can recover it from the insurer.
Under the CIF contact, the seller is required to deliver the goods on board of the vessel at the agreed port of delivery
According to the CIF contract, the seller has to bear all costs relating to the goods until delivery of the goods on board the vessel. However, under the CIF contract, the seller's duty to provide a contract of carriage and has to insure the goods under the insurance contract. Moreover, the insurance policy has to protect to the buyer. Otherwise, the seller commits to breach of the contract(2Hickox v Adams [1876] 34 L.T.404.)

. Under the English Law, there is no general rule to obtain an export licence. It depends on the contract, which the party, who has the best position to obtain it. According to
Brandt &co. case is that, “….. both seller and buyer were British traders albeit that the buyer was securing goods from an overseas merchant so he has to apply for the export licence, because he alone knows full facts regarding the destination of the goods.”(33 Brandt & co. v Morris &co. Ltd. [1917] 2 K.B. 784)
On the other hand, if the seller is in a better position than the buyer, he is responsible to provide a licence. Under the CIF contract, it is also seller's responsibility to provide an export licence.

CIF contracts are generally attractive to both the seller and the buyer.As far as the seller is concerned, he can charge a higher price taking into account the extra services that is obtaining shipping space and insurance he provides.His margin of profit in a CIF contract could be substationally higher than in an FoB contracts since he may be able to obtainreasonable rates for freight and insurance depending on the prevailing economic conditions. The seller usually gets paid for the goods before their arrival at the destination, since payment for the goodsbefore their arrival at the destinationsince payment for the goods in

CIF contracts often takes place when the documents are tendered to the buyer or to the bank in the event of a documentary credit arrangement between the seller and the buyer. However, it must be noted that payment does not always take place against tender of documents. The parties may have agreed to deferred payment credit.
The attractiveness of CIF contract as far as the buyer is concerned, is that he does not have to undertake the task of finding shipping space or insurance, which may be all the more difficult in a foreign country due to unfamiliarity with local business practices. The buyer could appoint an agent in the country of export to undertake the tasks of obtaining shipping space and insurance cover, but this assumes that the costsof an agent can be covered, or reliable and trustworthy agent can be found for a reasonable remuneration. The risk of any increases in transportation an insurance costs also remains with the seller. Further, the goods do not have to be paid for until the relevant documents are tendered. Once the necessary documents are acquired he is able to sell the goods to a third party on the strength of the documents. The buyer also acquires the right to sue the carrier, under the Carriage of Goods by sea act 1992, with the transfer of the bill of lading.

CIF contracts are undoubtedly the most important of the contracts based on the carriage of goods by sea.

• The classical judicial definition of a CIF contract was given by Lord Atkinson in Johnson v Taylor Bros. [1920] AC 144 at 145 [1920] AC 144 at 145 [Lord Atkinson]
• The vendor …is bound by his contract to do six things. First, to make out an invoice of the goods sold. Secondly, to ship at the port of shipment goods of the contract description. Third, to procure a contract of affreightment under which the goods will be delivered at the destination contemplated by the contract. Fourth, to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer. Fifthly, with all reasonable despatch to send forward and tender to the buyer three ‘shipping documents', namely, the invoice, bill of lading and policy of insurance, delivery of which to the buyer is symbolical of delivery of the goods purchased.
In Smyth & Co. Ltd v Bailey, Son [1940] 3 All ER 60 [Per Lord Wright]

“The initials [CIF] indicates that the price is to include cost, insurance and freight. It is a type of contract which is more widely and more frequently in use than any other contracts used for the purposes of seaborne commerce.”