Lord Wright in Smyth [1] described CIF as a contract that is widely and frequently used than any other used for the purposes of sea borne commerce.[2] The initials CIF stand for: cost (the sale of contract), insurance (the contract of insurance) and freight (the contract of carriage). CIF is a defined Incoterm under the Incoterms 2000[3]. The classical judicial definition of CIF was given in Taylor Bros[4] by Lord Wright.
It could be said that CIF serves better the interests of the seller as a shipper. The seller has the benefit of charging a higher price, taking into account extra services. The seller has also, the advantage of receiving the transacting money before the goods actually reach the buyer. Furthermore, the seller has the benefit to recover the value of goods in the event of damage or loss before payment[5].
The buyer has the benefit of not having to undertake the task of insurance or shipping space and has also the advantage of knowing the exact price he must pay[6]. More importantly, the buyer has the advantage to sue the carrier, under the Carriage of Goods by Sea Act 1992.Another benefit of being the buyer is that he has two substantial rights of rejection; the right to reject the documents and the right to reject the goods.
One of the main disadvantages is that the buyer cannot reject the goods or the documents if they are correct and he is obliged to accept and pay them. The separation of risk and the passing of property highlight a problematic nature, as the buyer may not be able to claim a right of possession of goods or bring an action in tort for damages done to the goods prior to his obtaining property.
Concluding, it could be said that CIF is attractive and advantageous to both seller and buyer, but better serve the interests of the seller than those of the buyer.
further reading:
Seyoum B, “Export-Import, Theory, Practices, and Procedures” (International Business Press)
Sellman P, “Law of International Trade” (4thedn, Old Bailey Press 2008)
Todd P, “Cases and Materials on International Law” (1stedn, Sweet& Maxwell 2002)
Reynolds F, “Managing Exports, Navigating the Complex Rules, Controls, Barriers and Laws” (New Jersey, John Wiley& Sons, Inc)
Bradgate R, ‘Publication Review the International Sale of Goods: Law and Practice’ (2008) 19 I.C.C.L.R. 305
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