Grade needs to be a first:

An accurate and comprehensive statement of the law with a critical analysis and application to the problem. Critical comment on the principles together with a critical understanding of the relevance of legal principles. Clear evidence of a wide literature search with attempts at original and valuable comment in either a legal or business context.

An answer that demonstrates accurate understanding of the relevant law appropriate to the question. An answer that demonstrates the ability to analyse legal concepts and to explain/argue them in relation to the question.

Cover different cases, laws, statutes and have original ideas incorporated
At least 25 literature sources
Include following sources:

1. Puja Soni, ‘The Rights and Duties of the Transacting Parties under FOB International Sales Contract’ available via
file:///Users/apple/Downloads/SSRN-id2423707%20(1).pdf
or
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2423707
2. Elis Tarelli, ‘C.I.F. or F.O.B.: That is the question!” Main features of the two contracts for the international sale of goods’ available via
file:///Users/apple/Downloads/SSRN-id1467820%20(2).pdf or http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1467820
3. Bassindale, J. ‘The Passing of ownership and risk in International commodity contracts’ (1993) 4 (2) ICCLR 517
4. Bennett, H.N. ‘F.O.B. contracts: Substitution of vessels’ (1990) 4 LMCLQ 466

5. Gower, L.C.B. ‘F.O.B. Contracts’ (1956) 19 (1) MLR 417
6. Feltham, J. D. ‘C. I. F. and F. O.B. Contracts and the Vienna Convention on Contracts for the International Sale of Goods’ (1991) JBL 413
7. Merrett, L. ‘Place of delivery in international sales contracts’ (2008) 67 (2) CLJ 244
8. Sassoon, D. M. ‘The Origin of f.o.b. and c.i.f. Terms and the Factors Influencing their Choice’ (1967) JBL 31
9. Sasssoon, D. M. ‘Application of FOB and CIF sales in common law countries’ (1981) ETL 50
10. Treitel, G. H. ‘Time of shipment in F.O.B. contracts’ (1991)2 LMCLQ 147
11. Williamson, J. ‘FOB Contracts: An Examination of their Principles and Practical Application in Internal Trade’ (1984-1987) 5 (4) Auckland U. L. Rev. 476
12. Treitel, ‘Damages for breach of CIF Contract’, (1988) LMCLQ 457 6.
13. Treitel, ‘Rights of Rejection under CIF sales’, (1984) LMCLQ 565
14. Crawford, ‘Analysis and Operation of a CIF contract’, (1955) Tulane LR 396
15. Takahashi, ‘Right to terminate (avoid) international sales of commodities’, (2003) JBL 102

Solution

International Sales Contract

Introduction

Standard terms of agreements of engaging in business, particularly the relationship between the merchant and purchase, in relation to their roles and responsibilities during the event of a sale have existed in numerous economies everywhere throughout the world. More so, these terms have been essential as a result the conflicting roles that do not explain in a clear manner the roles of both the purchaser and the vender during a transaction. As such, a clear distribution of the functions, together with the delivery of goods and products would have no confusions if the dealer and purchaser enjoyed a positive business relationship. These contractual laws that have administered the past transactions can be utilized for present and future business engagements.

Tentatively, the commitments of the vender and the purchaser have been the reason for the improvement of such contracts to direct the business transaction and also to guarantee that there is utmost fairness during all the transactions (Ferrari, 2012). Selecting the vessel to be utilized as a part of the shipment of merchandise has been a noteworthy drive to the engagement of contracts of sale as far as trade is involved. Depending on the sort of the contract of sale, the parties who are involved will indicate the suitable vessel or line of vessels to be utilized to convey merchandise. This additionally incorporates nomination of a substitute vessel in the event that the past vessel pulls back.

Nevertheless, another factor that has contributed to the utilization of sales contacts during vendor-purchaser transactions is the transfer of risks. In many sales contracts, the ownership of the goods is at the dealer until the merchandise are dispatched while on others, the ownership of the products by the vender extends to the purchaser’s favored ports. Then again, most contracts give the ownership of the goods to the purchaser once the dealer has delivered them at his/her country. The duties regarding getting custom leeway declarations and fare and import permit have added to the need for the contracts of sale (Klotz, 2008). There are two principle types of sales of contracts utilized as a part of the purchaser merchant business transactions. They are: Free on Board (FOB) and Cost, Insurance and Freight (CIF).

Free on Board (FOB)

The Free on Board (FOB) sales contract stipulates that the obligation of the dealer during a transaction is finished when the products are loaded onto the concurred shipment vessel. Thusly, the purchaser bears all the harm or misfortune costs that may happen to the merchandise starting there. Further, such expenses are excluded in the merchant invoices or in the bills of landing. In any case, the vender is required to clear the products for export (Soni, 2014). As such, in the Free On Board deals get, the commitments of the dealer incorporate giving products as indicated by the original contract with the purchaser. In addition to that, a business receipt to the purchaser ought to be produced in similarity with the agreements in this sale contract. The dealer should bear all costs required in clearing merchandise for export, which includes acquiring an export permit for the products.

Still, the Free on Board contract of sale request that the vender ought to convey the products to the concurred named port at the predetermined time in a similar vessel that the purchaser designated. The vender ought to hold up under all risks of the misfortune, harm and some other expenses until the merchandise have passed the ship rails in the favored port of the purchaser when the risks are transferred to the purchaser. The vender is likewise subject to pay all costs required in delivering the products until the risks are transferred to the purchaser. Such expenses incorporate stacking, offloading custom leeway and acquiring trade licenses among others (Soni, 2014). The vender is additionally charged with the obligation of giving of all reports identified with the shipment of the products, for instance, the notification of shipment, the document of delivery, transport records, invoices among different archives.

The obligations of the purchaser in the Free On Board contract incorporate paying for the products as provided in the Free On Board sale contract. Furthermore, Soni (2014) observes that the purchaser has the obligation of acquiring the import permit for the received products and also incurring every one of the costs included once the merchandise have been received in his/her favored port, particularly stacking, offloading and decision of transportation. The purchaser has likewise the duty of taking the delivery of the merchandise at the port. He/she should likewise bear every one of the risks that will be observed after the merchandise have passed the rails of the ship at the concurred delivery port.

Moreover, the purchaser assumes every one of the costs that incur the delivery of merchandise once they have passed the ship’s rails at the named delivery port. This incorporates costs acquired during the clearance in customs and the transit of the merchandise to its destination. The purchaser has the duty to give a coordinated notice to the dealer concerning the date and time of conveyance, the vessel name to be utilized together with the favored port and also sending a proof to the merchant on the conveyance of products and the state of the merchandise.

Cost, Insurance and Freight (CIF)

Gillies and Moens (2000) suggest that, the agreements that represent the sale of products impose an assortment of obligations to both the purchaser and the dealer. The Cost, Insurance and Freight contract oversees the sale together with the movement of merchandise from the point of manufacture to the concurred destination. As indicated by this contract law, the purchaser is relied upon to make the concurred installment once the documents that relate to the contract are delivered by the merchant.

As per the Cost, Insurance and Freight contract, the risk of products misfortune or damage goes from the dealer to the purchaser once the merchant has satisfied the obligation to convey the merchandise. This incorporates passing the cost to the purchaser and the agreement stipulates that such risks and expenses are transferred to the purchaser once the merchandise are sent for delivery from the dealer’s land area. In the Cost, Insurance and Freight contract, the vender has a more noteworthy extent of obligations in comparison to the purchaser.

Tentatively, the most essential obligation of the vender in the Cost, Insurance and Freight sale contract is to guarantee transporting the goods as concurred in the sale contract. The merchant has the duty to ship merchandise that the purchaser requested. This includes ensuring the delivery of the merchandise is convenient and to the concurred destination. The dealer has additionally the obligation of assigning the vessel that will be utilized to make the delivery (Gillies & Moens, 2000).

Furthermore, the vender is charged with the arrangement for the loading and offloading the goods at different stations before such products are delivered out of his/her country to the country or the destination of the purchaser. The Cost, Insurance and Freight sale contract additionally requires the merchant to set up the invoices for the products and offering these invoices to the purchaser before the merchandise are delivered.

Then again, the obligations of the purchaser as indicated by Cost, Insurance and Freight sale contract law incorporate making the concurred installment to the merchant upon the receipt of the significant records, for example, invoices, the policies of insurance together with the bill of landing (Gillies & Moens, 2000). More so, the purchaser can make the installment directly to the dealer or through the concurred agent. Besides, the purchaser has the obligation to receive the products from the merchant since, as indicated by this contract law, the risks of the merchandise and property possession goes to the purchaser once the products have been delivered at the dealers point.

Rules on Risk with regard to FOB and C.I.F contracts

The flexibility of the Free on Board sales contract makes it far more attractive as an option for exporters than the Cost, Insurance and Freights sales contract based on the rules on risk that the contracts offer to the seller, buyer and the carrier. For starters, products in transit are a target for thieves and opportunists. Bassindale (1993) mentions that fire can break out anyplace. All the more once in a while, accidents occur on roads and railways. Also, merchandise conveyed crosswise over water are liable for the anticipated risks of misfortune or harm throughout loading and of offloading, by sinking, or by stranding. Perishable merchandise also suffer whenever they are delayed.

Alternatively, some cargoes, particularly mass cargoes, suffer a measure of unavoidable misfortune, for instance, due to regular shrinkage or to the challenges of precisely measuring or evaluating their actual weight on loading and release. Cargoes conveyed via air have a tendency to endure less harm, however, as non-perishable air payload is frequently of high value, they tend to be magnets for thieves. Universal carriage can include partial carriage via means of road, rail, and ocean (Bassindale, 1993). However, each operation increases the risk of the products being damaged. As such, when it comes to the flexibility of the contracts of sale, the rules of risk apply to how the buyers and sellers protect themselves, together with who bears the loss.

The flexibility of the Free on Board sales contract that makes it more attractive to exporters is that the passing of risk does not follow after the passing of the merchandise has occurred. Also, under this sales contract it is the risk involved that is more concerned with. Tarelli (2009) mentions that one general rule that can be identified in the s20 of the 1979 Sale of Goods Act, which is applied to the Free on Board sales contracts together with the risk facing the merchandise, ordinarily goes to the purchaser when the merchandise are put over the ship’s rail. Subsequently, Tarelli observes that in the case of Pyrene and Co Ltd v Scindia Steam Navigation Co Ltd, the tender was at the dealer’s risk when it was dropped amid loading before crossing the rail of the ship (Tarelli, 2009).

Further, even in conditions where the merchandise does not go to the purchaser on the process of loading, risk ordinarily will pass under the Free on Board sales contract. Bassindale (1993) asserts that this will apply even where merchandise shipped for the purchaser form an unascertained part of a bigger bulk. Also, once the products are shipped, the dealer has satisfied his commitment to convey the merchandise and nothing remains to be finished by him under the agreement. The purchaser has an interest that is insurable in the merchandise from the time of shipment. On the off chance that the agreement changes the venders’ obligations, it might subsequently differ the time when the risk passes. For example, if the agreement is for the products to be conveyed “free on load up stowed”, the dealer’s obligations are not finished until the merchandise are securely stowed, so that the risk may not pass until this point.

On the other hand, the Cost, Insurance and Freight sales contracts are an exception when it comes to the general rule, which is observed in the s20 of the Sale of Goods Act that links the passing of risk to the passing of property. Tarelli (2009) mentions that whereas merchandise under a Cost, Insurance and Freight sales contract passes at the time the purchaser pays and takes up the records, the merchandise are regarded to be at the purchaser’s risk from the time of the shipment. Likewise, where the merchant transports merchandise for the purchaser, risk is also observed to be passed at the time of the shipment.

Under this sales contract, Tarelli observes that where the agreement was made after shipment, risk also passes at the time of the agreement so that the products are regarded to have been at the purchaser’s risk since the time of the shipment. This may appear to be hard on the purchaser, yet in certainty, it enforces little hardship (Tarelli, 2009). The purchaser takes the advantage of the agreement of carriage together with the insurance policy, and is in this manner ready to guarantee, either under the agreement or the approach, in regard of most risk or misfortune from the time of shipment. However, the purchaser is open to the risks that are not secured by the agreement of carriage or insurance.

Rights and Duties of Buyers

Under the Free On Board sales contract, the obligation of the purchaser is to select the port where the merchandise will be shipped. On the off chance that it is most certainly not clean in the agreement of sale, Soni (2014) asserts that there are three unique alternatives that can be picked. In the first alternative, the vender can pick the port of shipment. In the second alternative, it is the purchaser who selects the port where the merchandise will be shipped to. More so, in the third alternative, the agreement is left for vaguely.

The purchaser, still under Free On Board sales contract, offers a suitable ship for loading the merchandise. The purchaser needs to decide the place together with the period of delivery, and must also provide notice to the vender regarding the readiness of the vessel. As suggested by Soni, the selection of a vessel is a condition within the agreement. At the point when the merchant fails to assign a vessel, the purchaser can deny the agreement and in turn claim damages (Soni, 2014). Unless otherwise concurred, the purchaser can likewise make a second selection within the period of the shipment of the merchandise, if the first selection is inadequate.

By comparison with the Free On Board sales contract, under the Cost, Insurance and Freight sales contract, the purchaser has no under commitment to get a ship, place, and specify the period of delivering the merchandise (Merrett, 2008). Then again, under the Cost, Insurance and Freight sales contract, the fundamental obligation of the purchaser is to acknowledge the documents that arrive with the merchandise, which will be clarified in detail later, if these reports are in similarity with the agreement of sale. Furthermore, after the purchaser has acknowledged the documents, he/she is required to pay the full price of the merchandise. Thereafter, the buyer is required to take delivery of the merchandise at the agreed point of destination, whilst bearing all the costs of unloading.

Summary

As discussed, the flexibility of the ‘Free On Board’ (FOB) sales contract makes it far more attractive as an option for exporters than the Cost, Insurance and Freights sales contract. The Free on Board (FOB) sales contract stipulates that the obligation of the dealer during a transaction is finished when the products are loaded onto the concurred shipment vessel. On the other hand, the Cost, Insurance and Freight (CIF) sales contract oversees the sale together with the movement of merchandise from the point of manufacture to the concurred destination. In turn, the flexibility of the FOB sales contract over the CIF sales contract can be observed through the passing of risk, together with the rights and duties of the buyers.

The FOB sales contract is more flexible when it comes to the passing of risk during the entire process of the transaction, as compared to the CIF sales contract. Likewise, the buyers of merchandise are offered more flexibility under the FOB sales contract. To close, it can be concluded that the Free On Board sales contract offers more attractive options for exported than the Cost, Insurance and Freights sales contract.

References

Bassindale, J. (1993). The Passing of Ownership and Risk in International Commodity Contracts. INTERNATIONAL COMPANY AND COMMERCIAL LAW REVIEW, 4, 51-51.

Ferrari, F. (2012). Contracts for the international sale of goods: Applicability and applications of the 1980 United Nations Sales Convention. Leiden: Martinus Nijhoff Publishers.

Gillies, P., & Moens, G. (2000). International trade and business: Law, policy and ethics. Sydney, NSW: Cavendish.

Klotz, J. M. (2008). International sales agreements: An annotated drafting and negotiating guide. Alphen aan den Rijn: Kluwer Law International.

Merrett, L. (2008). Place of Delivery in International Sales Contracts. The Cambridge Law Journal.

Soni, P. (2014). The Rights and Duties of the Transacting Parties under FOB International Sales Contract.

Takahashi, K. (2003). Right to terminate (avoid) international sales of commodities. Journal of business law, 102-130.

Tarelli, E. (2009). CIF or FOB: That is the Question! Main Features of the Two Contracts for the International Sale of Goods. Main Features of the Two Contracts for the International Sale of Goods (September 3, 2009).

Category: Essays