M07CLS: International Trade Law Assignment - CIF Contract Evaluation

This essay critically evaluates the nature of Cost, Insurance, and Freight (CIF) contracts within the framework of international trade law, addressing the central question of whether a CIF contract constitutes a contract for the sale of documents or for the sale of goods. The essay begins with an introduction that sets the context of international trade law and its evolution, emphasizing the role of CIF contracts in facilitating global trade. It then provides an overview of CIF contracts, detailing their components and operational mechanisms, including the responsibilities of the seller in arranging for the goods, insurance, and shipping. The discussion contrasts the CIF contract with the traditional contract for the sale of goods, highlighting the documentary aspect of CIF contracts. The analysis section examines relevant legal principles and case law, such as Couturier v Hastie, to determine the nature of the contract. The essay concludes by summarizing the key findings and offering a final assessment of the nature of CIF contracts, ultimately emphasizing the complexities and nuances of this important commercial instrument in the realm of international trade.

Trade Law
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Table of Contents
Question 1........................................................................................................................................3
Introduction..................................................................................................................................3
Discussion....................................................................................................................................4
Overview of CIF contract........................................................................................................4
Contract for Sale of Documents..............................................................................................5
Contract for Sale of Goods......................................................................................................7
Analysis...................................................................................................................................8
Conclusion...................................................................................................................................9
Question 2......................................................................................................................................11
Issue...........................................................................................................................................11
Rules..........................................................................................................................................13
Analysis.....................................................................................................................................15
Conclusion.................................................................................................................................16
Bibliography..................................................................................................................................19
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Question 1: Critically Evaluate the Nature of a CIF Contract – Is it a Contract for the Sale
of Documents or for the Sale of Goods. Discuss in Relation with International Trade Law
Introduction
After the era of World War II, the time period was recognized as a global movement with the
motive to ease up trade procedures and to prepare frameworks that can help in regulating the
performance, thereby resolving the related disputes. . According to the legal theorists, the trade
policy deemed to have failed in both global and domestic field, with relevance to the unequal
distribution of power in the countries. These have been found in case of trade consultation,
which are the results of the legal planning. They were not sufficient in maintaining discipline in
the trade and commerce of the country and in regulating the manner, in which the government
can depict the interest of the citizen1. According to this perspective, the International Trade Law
has taken the attempt to reinforce the trade and commerce so as to ensure that national
governments fulfill the trade law instead of getting indulged in domestic affairs. The
international trade law has been established in order to plays the role of an interface between the
domestic and the global trade law. At the stating period of international law, the law just focused
on duty and taxes. However, the scope of law deemed to increase and the capacity broadened
aiming at looking after the aspect of policymaking of domestic trade with the passage of time.
Moreover, the law has developed a fairly stringent policy that can assist in settling the disputes
taking place in the trade of the country2. The CIF comprise of three parts such as contract of sale
between vendor and purchaser, agreement of cart and the agreement of sea insurance3. The
1 FCTC/McCabe Centre for Law and Cancer, ‘What is international trade law and why is it relevant to WHO FCTC
implementation?’ (McCabe Centre, 2019) < https://untobaccocontrol.org/kh/legal-challenges/trade/international-
trade-law-relevant-fctc-implementation/ > accessed 30 August 2019
2 Emily C. Barbour, ‘Trade Law: An Introduction to Selected International Agreements and U.S. Laws’ (2010) CRS
1, 1.
3 Law student a, ‘The FOB and CIF Contracts’ (Law Teacher, 2 February 2019) < https://www.lawteacher.net/free-
law-essays/commercial-law/the-fob-and-cif-contracts-commercial-law-essay.php> accessed 30 August 2019
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objective of this paper is to evaluate the character of a CIF agreement and to find out whether it
is an agreement for the trade of documents or that of the cargo pertaining to the context of
international trade law.
Discussion
Overview of CIF contract
It has further been found that the CIF is used from the heart of the nineteenth century. Lord
Wright, stated that CIF can be regarded as a category of agreement, which is used normally and
on an additional regular basis as compared to any extra agreement It is also utilized for the
function of sea-borne trade. According to this agreement, the vendor is regarded as the in-charge
of supplying the goods, indemnifying them and then shipping them in the particular address. It
further includes the cost, insurance and shipment of goods from one place to another4. However,
it has been observed that a CIF contract includes the factors such as the seller, who not only gets
involved in the agreement of sale, however; it also enters into the agreement of indemnity as well
as of carriage. Therefore, the seller can be considered as responsible for fixing all the prices in
order to manage the insurance and carriage-related expenses. Moreover, the seller can be referred
to as the one, who can bear the cost of changes in insurance and freight after the contract is being
signed5.
CIF contract is often regarded as a documentary of sales and in accordance with CIF many cases
came up through shipping losses in the Wars. The company responded to this question stating
that the trading of goods was carried out throughout the intermediate of credentials. According to
4 Sakshi Agarwal, ‘(Cost, Insurance and Freight) CIF Contracts’ (Law Times Journal, 2019) <
https://lawtimesjournal.in/cif-contracts/> accessed 30 August 2019
5 Law student, ‘Critically Evaluate Whether a CIF Contract Is a Contract for the Sale of Documents or a Sale of
Goods Related in International Trade Law’ (Law Teacher, 2 February 2019) <https://www.lawteacher.net/free-law-
essays/general-law/saleofdocuments.php > accessed 30 August 2019
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the case of Couturier v Hastie of 1856, the House of Lords has given the verdict, which mentions
the same factor as above, i.e. a tender of CIF documents did not stimulate the purchaser’s job to
forfeit the additional cost6, while that troubled cargo that had come to an end to be present at the
agreement date, on the construction of the contract,. The contract accepts the subsistence of that
merchandise7.
However, the Sale of Goods agreement illustrates the nature of a CIF agreement as a trade
document, in which the corporeal responsibilities of the sellers are perched till the process of
transferring the document is fully completed. The duties of the seller of the goods are never
restricted to just delivering the goods to the buyer or to a mediator of the purchaser of goods8. As
per the Sale of Goods Act 1979 ('SGA) under section 27, the usual duty of seller is regarded as
“a seller to deliver, is commuted under the CIF contract into duties to ship, or procure or adopt
the shipment of, conforming goods and to transfer documents that give the buyer direct rights
against the insurer and the carrier. Subject to the terms of the contract, the seller's physical duties
lie in the description, quality and fitness of the goods shipped, as well as in their timely
shipment”9.
The contract for Sale of Documents
An agreement is regarded as a promise or set of promise, the breach of which gives rise to an
action or an act on which the law identifies as a duty in several ways. In general, the contract of
trade of credentials is governed by common law despite the information that the common rule
6 In- house law team, ‘Mistake Cases | Contract Law’, (Law Teacher, 2019)<
https://www.lawteacher.net/cases/mistake-cases.php> accessed 30 August 2019
7 M G Bridge. ‘Documents and CIF Contracts’ (2012) A 4, 4.
8 Nelson Enonchong, ‘CIF(Cost, Insurance, Freight) Contracts’ (University Of Birmingham, 2017)
<https://www.studocu.com/en/document/university-of-birmingham/international-sale-of-goods/lecture-notes/cif-
contracts/1827697/view > accessed 30 August 2019
9 M G Bridge. ‘Documents and CIF Contracts’ (2012) A 4, 4.
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was established for the contracts, which indulges in the sale of goods. These rules are even
involved in Article 2 of the Uniform Commercial Code (“UCC”). It has also been found that
Article 2 has undertaken many of the common law of contracts, but at one point, the common
law possesses a certain amount of differences from Article 2. This article exists in a Contract for
the Sale of Goods. In case of destination contract, the seller facilitates the purchaser with the
notice of sale through a document based on the details, which is necessary to obtain delivery10.
There are some of the basic principles, which have to be followed at the time of preparing a
contract in accordance with the law of contract which comprises the creation of an agreement,
filling of an agreement and the last part of a contract11. An agreement is regarded as an
agreement, through which an obligation can be raised, imposed or renowned by law. According
to Common Law, there are 3 basic important elements that must be considered for the formation
of an agreement such as agreement, contractual purpose and thoughtfulness. “The first requisite
of a contract is that the parties should have reached an agreement. Generally speaking, an
agreement is reached when one party makes an offer, which is accepted by another party. In
deciding whether the parties have reached an agreement, the courts will apply an objective test”
12.The sale agreement is regarded as a type of legal document that contains all the terms and
conditions of a sale. The document not often but sometimes helps in applying the conditions on
the parties included in the sales. Therefore, it can generally be regarded as a bill of sale or simply
a receipt of sales. Document of sale is also known by the name of “Sale and Purchase
Agreement”, which mainly covers the sale of goods more than services13.
10 Barbri, ‘What Is a Contract’ (2015) CAS 1,1
11 Thomson Reuters, ‘Sale and storage of goods in the United States: overview’ (Practicle Law, 2019) <
https://content.next.westlaw.com/Document/I1c753af83d2411e598dc8b09b4f043e0/View/FullText.html?
contextData=(sc.Default)&transitionType=Default&firstPage=true&bhcp=1> accessed 30 August 2019
12 Allen And Overy, ‘Basic Principles Of English Contract Law’ (2016) AFID 1, 3
13 LegalMatch, ‘What Is a Sales Agreement?’ (Sales Agreement Laws, 2019) < https://www.legalmatch.com/law-
library/article/sales-agreement-laws.html > accessed 30 August 2019
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The contract for Sale of Goods
A sale contract is regarded as an accord, undertaken between a purchaser and a vendor with the
motive to perform sale and transfer of cargo securities, and extra properties. In the United States,
the contract of domestic sale is governed by the Uniform Commercial Code. The contract of
international sales is governed under the United Nations Convention on Contracts for the
International Sale of Goods (CISG), and this process is recognized as the Vienna Sale
Convention. Article 2 of the UCC act thus states that “a contract for the sale of goods for more
than $500 must be in writing in order to be enforceable (UCC 2-201). The sale of securities is a
special case covered in Article 8 (UCC 8-319); to be enforceable a contract for the sale of
securities must be in writing regardless of the amount involved. For the sale of other kinds of
personal property, a minimum of $5,000 must be involved before an enforceable contract must
be in writing. Otherwise, an oral agreement is enforceable as a binding contract”14.
It has thus been found that there are varied uses for a sale of goods contract and these contribute
to making this law a flexible one. For example, as per the name of the contract, it can be
analyzed that this contract came into existence for the trade of physical commodities. It has also
been observed that this agreement is used for exchanging services for money. For example, if an
individual hires someone to install a water purifier in the kitchen then the person gets involved in
the contract of sale of goods15. The Sale of Goods Act 1979 is an Act, which was established in
the United Kingdom to adjust and manage the contracts, in which goods are sold and
purchased16.
14 UpCounsel, Inc., ‘What is a Sale of Goods Contract’ (Sale of Goods Contract: Everything You Need to Know,
2019) < https://www.upcounsel.com/sale-of-goods-contract> accessed 30 August 2019
15 UpCounsel, Inc., ‘What is a Sale of Goods Contract’ (Sale of Goods Contract: Everything You Need to Know,
2019) < https://www.upcounsel.com/sale-of-goods-contract> accessed 30 August 2019
16 Law student b, ‘Definition of Sale of Goods Act’ ((Law Teacher, 2 February 2019)
<https://www.lawteacher.net/free-law-essays/commercial-law/definition-of-sale-of-goods-act-commercial-law-
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Analysis
It has also been analyzed that in CIF agreement, the vendor is considered to be accountable for
the carrying and indemnity that comes under the name of port or the destination, despite the fact
that the buyer has agreed to compensate not beside the release of the commodities but for the
shipping of documents from one place to another. Hence, in some of the cases, it is regarded as
an agreement for the sale of credentials. The significance of the document is that it has a central
role to play with respect to the CIF contract. This, therefore, provides the contract, its range of
special characteristics. It may even alternatively be used as an agreement for the transaction of
credentials. IT is also the responsibility of the seller to take into consideration the contract, which
largely leads to tendering the statement of lading, along with account and the guarantee policy to
the buyer.17
It is a type of document, which contains the details of goods to be transferred and even enables in
caring the purchaser against the hazard of loss throughout the transfer of goods. It enables an
individual to an arrangement with the commodities before those reach the port or the destination.
It also consists of the invoice of lading as productive delivery of the goods and the right to obtain
possession. It may pass on to the buyer the designation to the goods, and constitutional rights of
an exploit against the transporter in the occurrence of defeat and delay among others. The policy
of insurance gives assurance to both the buyer and the seller against the perils of the sea.18
essay.php> accessed 30 August 2019
17 Law student, ‘Critically Evaluate Whether a CIF Contract Is a Contract for the Sale of Documents or a Sale of
Goods Related in International Trade Law’ (Law Teacher, 2 February 2019) <https://www.lawteacher.net/free-law-
essays/general-law/saleofdocuments.php > accessed 30 August 2019
18 Law student, ‘Critically Evaluate Whether a CIF Contract Is a Contract for the Sale of Documents or a Sale of
Goods Related in International Trade Law’ (Law Teacher, 2 February 2019) <https://www.lawteacher.net/free-law-
essays/general-law/saleofdocuments.php > accessed 30 August 2019
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The terms and condition of CIF always focus on the expansion of trade and commerce. In the
year 1862 and 1871, the first reported case of CIF was published and during that period of time,
it was mentioned as C.F. & I. as an alternative of C.I.F. in the respective contract. Hence, the
purchaser or his manager was not necessary to be actually current and the reimbursement was
belated to a jointly agreed date, which included both the buyer and the seller19.
Conclusion
It can be concluded that mainly the legal provisions, which are associated with the Sale of Goods
in International Contracts do not relate to The Sale of Goods in CIF contracts. However, it holds
on a relationship with the sale of the contract. There is always a question that arises to the buyer
and the seller that if they did not want to pay for the contract cost then why they have chosen
such an agreement is selected. In international contract, alternatives are accessible to both
vendors and purchasers. The credentials run to the centers of the agreement and the CIF
agreement rely largely on the transport of the credentials, which further helps the purchaser to
give certain organize, and rights to recover compensation and a right of discarding of the
commodities. If the commodities are damaged because of the mistake of the transporter or
because of some other reason, this is considered as a sale of documents. The law seems to be
critical in arguing that CIF is a Sale of Documents, especially in the situation, when it is
considered that the credentials are the main factors of the contract. They are also the key factor,
which contributes in providing shape to the duties of the parties, determining the state of the
merchandise and essential when hazard passes. It is a document, on which the whole contract can
rely upon.
19 CustomWritings, ‘Are CIF Contract of Sale of Goods a Sale of Documents?’ (Writing Service, 2019) <
https://customwritings.co/are-cif-contract-of-sale-of-goods-a-sale-of-documents/ > accessed 30 August 2019
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Question 2: Write a case note on any one international trade law case that you have studied
on this module. Your case note should cite authority as appropriate; it should explain the
facts and decision in the case and include a commentary on the issues raised in the case and
the way in which the law was applied by the Court.
Issue
According to the International Trade Law, the case of China Steel Corporation v. U.S. was
brought forward in the court, where China Steel Corporation, as well as Yieh Loong, were the
plaintiff and the United States, the defendant20. The first issues filed with the consent of the
plaintiff was regarding the sale of goods at ‘Less Than The Fair Value’ (LTFV), which is
informed under the ‘International Trade Administration’ along with the ‘United States
Department of Commerce’. It comprised Hot-Rolled Flat Carbon steel product brought from
Taiwan. Due to the initiated antidumping investigation with Commerce, they issued a
questionnaire to the China Steel along with Yieh Loong so as to provide a response for the
questions related to 4 sections on 4th of Jan, 200121.
Section A includes questions related to general information, while Section B entailed
information on the domestic sale or sale in the third country. Section C, on the other hand,
consisted of the information on sale in the United States with the final Section D dealing with the
production cost. China Steel applied for a petition requesting for permission to get excused from
reporting information about home market resale. Commerce further replied that they could not
determine the case on the basis of information provided by them on 29th Jan 200122. It can, in this
20 United States Court of International Trade, ‘China Steel Corporation v.U.S.’ < https://casetext.com/case/china-
steel-corporation-v-us-2> accessed 30 August 2019.
21 United States Court of International Trade, ‘China Steel Corporation v.U.S.’ < https://casetext.com/case/china-
steel-corporation-v-us-2> accessed 30 August 2019.
22 United States Court of International Trade, ‘China Steel Corporation v.U.S.’ < https://casetext.com/case/china-
steel-corporation-v-us-2> accessed 30 August 2019.
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context, be evidenced that the “Plaintiff contests four aspects of Commerce's final determination:
(1) Commerce's affiliation determination regarding the Yieh Loong affiliates; (2) Commerce's
decision to apply facts otherwise available; (3) Commerce's decision to apply adverse facts
available; and (4) Commerce's conduct in investigating the antidumping petition” 23.
China Steel and Yieh Loong presented their response for Section A on February 2, 2001, along
with an extension for three weeks to complete the statement of other sections such that the
information is extensive as well as complex. So, the commerce permitted the deadline for
February 22. China Steel along with Yieh Loong on getting the approval they filed the required
responses with respect to Commerce's ‘Questionnaire I’ which was further divided into sections
such as sections B, C, and D. The process of distributing questionnaires and gathering responses
continued. On 30th of March 2001, they requested for the extension of more ten days in order to
provide the China Steel Company with an opportunity to obtain the information related to the
resale figures of the affiliates which is supposed to be filed in the ‘Commerce’s Questionnaire
II’. The extension was asked to obtain the complete information about the affiliates' records
which are kept in such a system. It is not a simple process for the China Steel to extract the
complete information collectively. The company and Yieh Loong was able to file their responses
which were asked in the questionnaires of section D on 9th April 2001. ‘Questionnaire III’ was
provided by the commerce to the Company and Yieh Loong on April 17 and April 18, 2001, as a
result of which they requested for additional time as an extension to provide "preliminary or
final" report so that the two companies could defend their cases24.
23 United States Court of International Trade, ‘China Steel Corporation v.U.S.’ < https://casetext.com/case/china-
steel-corporation-v-us-2> accessed 30 August 2019.
24 China Steel Corp. v. United States
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