Page 134 - DMGT407Corporate and Business Laws

Unit 5: Law of Sale of Goods

such request, take delivery of the goods, he is liable to the seller for any loss occasioned by Notes
his neglect or refusal to take delivery and also for a reasonable charge for the care and
custody of the goods. The above rule does not affect the seller’s right to treat the buyer’s
refusal or neglect as a repudiation of the contract (s.44).

5.6.3 Passing of Property in Goods in the Case of Foreign Trade

There are certain terms which are used in the contract of sale of goods in foreign trade. These
terms reflect a number of conditions which are either attached by the parties or by custom and
practice of business people. The most usual of such contracts are: (i) Free on board (F.O.B.) or
Free on Airport (F.O.A.) and (ii) Cost, Insurance and freight (C.I.F.) and Ex-Ship.
1. F.O.B. or F.O.A contracts. This means that the property in goods passes to the buyer only
after the goods have been loaded on board the ship, and accordingly, the risk attaches to
the buyer only on shipment of goods. Therefore, when price is noted F.O.B., then the seller
or shipper has to bear all the expenses up to and including shipment of goods on behalf of
the buyer.
2. C. I. F contracts: It is a contract for the sale of insured goods, lost or not lost, to be
implemented by the transfer of certain documents. These documents are (i) Bill of lading;
(ii) Insurance policy; (iii) Invoice; (iv) A certificate of origin. This method protects the
interests of both the exporter and the importer. The property in the goods passes to the
buyer on the delivery of these documents. Thus the difference between F.O.B and C.I.F
contracts, so far as the passing of property is concerned, is that in the former the property
passes when the goods are put on board a ship, but in the latter case the property passes
when the documents are received by the buyer and he pays the price. The buyer pays the
price against the documents, even where goods have not yet arrived. Therefore, sometimes
it is said that a C.I.F. contract is a contract for the sale of documents. But, the documents
represent symbolic delivery of the goods and therefore, a C.I.F. contract is really a contract
for the sale of goods. C.I.F. quotation includes F.O.B. price plus cost of freight and premium
on marine insurance up to the port of destination.

3. Ex-ship contracts: Under this agreement the seller has to deliver the goods to the buyer at
the port of destination. Therefore, the ownership in the goods will not pass until actual
delivery. It will, therefore, be for the exporter to insure the goods to protect his interests.
The price quotation will include all expenses up to the point of delivery of the goods at the
port of destination.
Self Assessment

Fill in the blanks:
11. Delivery is defined as a …………………….transfer of possession from one person to another.
12. A …………………..is a contract for the sale of insured goods, lost or not lost, to be
implemented by the transfer of certain documents.

5.7 Unpaid Seller and his Rights

A contract is comprised of reciprocal promises. In a contract of sale, if seller is under an obligation
to deliver goods, buyer has to pay for it. In case buyer fails or refuses to pay, the seller, as unpaid
seller, shall have certain rights.

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