THE DIFERENCE BETWEEN C.I.F CONTRACT AND F.O.B CONTRACT

 

C.I.F. Contract is the acronym which means Cost, Insurance and Freight. It is a type of a contract which is more widely and more frequently in use than any other contract used for the purpose of seaborne commerce.

According to Lord Porter in the case of Comptoir d Achat v Luis de Ridder it is the type of contract where the seller is under obligations to ship at the port of shipment, goods of the description enclosed in the contract, to secure contract of carriage by sea, to make out invoice which will charge the buyer with the agreed price of the actual cost, commission charges, freight and insurance premium and to tender bill of lading to the buyer covering   the goods contracted to be sold.

Against tender of the aforesaid documents the purchaser must pay the price, receive the goods at the port of destination, procure import or permit license and in such a case  a property may pass either on shipment or on tender of documents. The risk generally passes on shipment and title over the goods does not pass until documents which represent the goods are handed over to the buyer in exchange of price. In C.I.F. contract, the focus is not the sale of the goods themselves, but the sale of documents relating to the goods. This is to the effect that, possession of document is as good as possession of goods in transit.

F.O.B. contract on the other hand is a trade term which stands for Free On Board. This type of contract was well elaborated in the case of Wimble Sons & Co. Ltd v Rosenberg & Sons. In this landmark case, it was declared that, F.O.B. is the contract under which the buyer nominates the seaworthy ship, the seller is obliged to put the goods free on board at his own expense  under  the  account of the buyer.

Furthermore, the seller is under obligation to pay cost and bare responsibility of putting the goods free on board until the goods passes the ship rail. It is at the ships rail where division of liability in F.O.B. contract occurs, this is in the sense that, the risks over the goods passes from the seller to the buyer when the goods passes over the ships rail.

However, the passing of property in goods has different legal procedure in terms of unascertained and ascertained goods. In F.O.B contract, unascertained goods those shipped in bulk to be distributed to different buyers at the port of destination, the property in such arrangement does not pass to the assigned buyers until the bulk of goods are apportioned to them at the port of destination.

The property will be said to have been passed, when every concerned buyer has acquired his or her portion of the imported goods at the port of destination. In case of ascertained goods, property passes when they are shipped unless the passing of title is postponed by express or implied contract terms.