In this article, I will be comparing the seller’s obligations in CIF contracts under the Sale of Goods Act (1979) to CIF contracts under the 1980 UN Convention on Contracts for the International Sale of Goods. CIF contracts stand for cost, insurance, and freight. The price of the goods is inclusive of freight and insurance costs to the destination specified by the contract. The seller is usually paid before the arrival of the goods because payment is made when the documents are tendered to the buyer.
In Johnson v Taylor Bros & Co Ltd [1920] AC 144, the obligations of the seller in the CIF contract stated as first, to make out an invoice of the goods sold. Second, to ship at the port of shipment goods of the description contained in the contract. Third to procure a contract of affreightment under which the goods will be delivered at the port contemplated by the contract. Fourth, to arrange for insurance upon the terms current in the trade. Fifthly, with all reasonable dispatch to send forward and tender to the buyer these shipping documents. Under the Sale of Goods Act, 1979 (SGA) and the 1980 UN Convention on Contracts for the International Sale of Goods (CISG), obligations and liabilities of the seller and their effects are different in some aspects.
Seller’s Obligations Under the SGA
The first obligation of the seller under the SGA is that he has to sell specific goods, or the contract will be void. Section 6 of the SGA states that “Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void.” Specific goods are defined by Section 62 of the SGA as goods identified at the time a contract of sale is made. The second obligation is the duty to pass a good title to the goods under s.12 of the SGA. The aim and effect of the section are to require the seller to transfer the property or title of the goods to the buyer. In Section 12 of the SGA, it is stated that the seller must have a “right to sell the goods” which means the seller must have the power to vest the general property in the goods in the buyer. The third duty of the seller is to deliver the goods. Section 27 of the SGA states that “The seller must deliver the goods, and of the buyer to accept and pay for them”. Under the SGA, delivery means “the voluntary transfer of possession” under s. 61, but it does not require the seller to transfer the ownership of the goods. Under s.17 “Property passes when intended to pass.” Section 32 states that “where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.” The principle is the intention of the parties, and it is structured in s.18(5) of the SGA.
In “Pacific Molasses Co. Ltd. v. Entre Rios Cia Naviera SA”, it states as a ‘prima facie case’ the property passes at a later date on the endorsement of the bill of lading. The SGA s. 20 states that: “Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not.” The risk that is passed is the risk of loss or damage. In “Arnold Karberg v Blythe, Green, Jourdain & Co [1916] 1 QB 495” documents were frustrated because of war and the judge decided that documents were not sufficient, so risk did not pass from seller to buyer. In “The Julia Case [1949] AC 293” risk passes from the goods passed over the rail if the goods are already at sea from the buyer to the seller, and the documents have been endorsed. In Section 29 of the SGA, it creates a presumption that the place of the delivery is the place where the goods are known to be at the time of the contract. In any other cases where there is not any special agreement, the place of delivery is the seller’s place of business or if not his residence.
Under Section 29(6), it is in seller’s responsibility that the goods are in a “deliverable state.” Under s. 28 it is stated that the delivery of the goods and the payment of the price are concurrent conditions. When the parties have fixed no time under s.29(3) “the seller is bound to send the goods within a reasonable time”. Sometimes seller might ask for an extension of time, and s.11(2) refers to a waiver of a condition by the buyer but under contract law, it is a general principle so it will apply to both buyer and the seller. The seller must deliver the right quantity of goods under s.30(1), and s.31(1) states that the seller cannot deliver the goods partly as instalments because the buyer is not bound to accept it. Another duty of the seller is to supply goods of the right quality. Section 13(1) and (2) states that the goods must correspond with their description also under s. 14(2) there is an implied term that the goods supplied must be of satisfactory quality.
Seller’s Obligations Under the CISG Convention
Under the CISG Convention, the seller’s primary obligation is to deliver the goods. Art. 30 provides that “The seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods, as required by the contract and this Convention”. The meaning of delivery in the Convention is steps that the seller must take to be sure that the buyer obtains possession of the goods. The delivery obligation might be performed unilaterally by the seller. The delivery obligation can be performed without giving the actual possession under Art. 31 of CISG which provides in handing the goods over to the first carrier who should be an independent carrier that is not an employee of the seller or the buyer for transmission to the buyer; in placing the goods at the buyer’s disposal at that place. Also, there is not a requirement for the seller to deliver conforming goods.
The parties are free to make any arrangement about delivery and payment mechanism. If there is not an agreement made, Art.58 provides that “the buyer must pay the price when the seller places either the goods or documents controlling their disposition at the buyer’s disposal following the contract and this Convention”. The price is not payable unless the seller is handing the goods or documents to the buyer. Under Art.58(2) “If the contract involves carriage of the goods, the seller may dispatch the goods on terms whereby the goods, or documents controlling their disposition, will not be handed over to the buyer except against payment of the price”.
Art. 31 states the delivery place when the parties do not agree to a specific delivery place. The parties contract on CIF Incoterms, the seller must “deliver the goods on board the vessel at the port of shipment on the date or within the period stipulated.” Concerning some delivery terms, the Incoterms produce the same place of delivery and delivery obligation as Art. 31. Art. 32(1) provides that “where delivery is made by handing the goods over to the carrier and where the goods are not clearly identified to the contract, the seller must give the buyer notice of the consignment specifying the goods.” According to Art. 32(2) the type of transport must be compatible with the goods that are carried, and the seller is bound to arrange it. Under Art. 32(3) “If the seller is not bound to effect insurance in respect of the carriage of the goods, he must, at the buyer’s request, provide him with all available information necessary to enable him to effect such insurance.” According to Art. 33 sellers must deliver the goods on time which is if a date is fixed on that date, if a time fixed in that period, in other cases within a reasonable time.
When the parties made a contract on CIF Incoterms the seller must hand over the transport documents to the buyer. Art. 34 states that which would, in any event, be the position namely, that if the seller is obliged to hand over documents relating to the goods, he must do so at the time and place and in the form required by the contract. The tender of such documents is usually a condition to secure the payment. Art. 30 states that the seller has to transfer the property but also under Art.4, the CISG is not concerned with the effect the contract may have on the property in the goods sold. Art. 35-37 states that the seller must deliver the goods which conform to the contract. This means the seller delivers the goods in the quality, quantity, and description required by the contract. Art. 35(2) sets out some obligations, that apply to all sales governed by the CISG unless they are excluded by the contract.
Art. 36 sets out the time at which the goods must conform and also provides rules for dealing with the distinction between a lack of conformity of the goods for which the seller is liable and losses or deterioration as risks that fall on the buyer. Art. 37 gives the seller who has delivered goods before the date for delivery the right to cure a non-conformity unless this would cause the buyer unreasonable inconvenience or expense. Lastly, the seller must deliver goods that are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim under Art. 41.
Differences Between the CISG Convention and the SGA
There are differences regarding the remedies of the buyer between the CISG and the SGA, which affects the seller and his rights. Under Art. 46 of the CISG two situations lead to specific performance. The first one is when the seller fails to deliver the goods, the second one is when the goods do not conform with the contract specialization. Generally, there are three remedies for the buyer; these are delivery of substitute goods; reparation of the defective goods; or avoidance of the contract. The buyer should choose his remedy in good faith under Art.7 of the CISG. Article 46(2) of the CISG applies only where the seller has already fulfilled his obligation to deliver the contracted goods. If the seller has not delivered the goods, then the buyer can require specific performance. Under the SGA s.52 specific performance is limited to ascertained goods, but in the CISG there is not a limitation like that. The leading judgment on this issue was available in the case “Societe des Industries Metallurgiques SA v Bronx Engineering Co”. The Court of Appeal held that “the courts will not enforce the unwilling seller to performance since the buyer can find similar goods in the market”.
Under the CISG, the choice of the remedy has been given to the buyer, whereas under the SGA, the English Court decides which remedy is better suited. Generally, English Courts prefer to end the contract and order payment of the damage under the SGA Section 51 whether than enforce specific performance. This is more advantageous for the seller because specific performance can be challenging to enforce. It could be economically inefficient and harsh for the seller, similar goods can be found in the market from different sellers.
In conclusion, the seller’s duties under the CISG and the SGA are mostly compatible. These are delivering the goods, delivering the title of the goods, and the transfer goods compatible with the CIF. Under the SGA, the goods must be ascertained. The buyer’s remedies are different between these two legal codes. The SGA is more advantageous for the seller because the court decides the remedy. Generally, it is the payment of the damages, not a specific performance and that economically benefits the seller.
References:
- Taylor Bros & Co Ltd [1920] AC 144
- Pacific Molasses Co. Ltd. v. Entre Rios Cia Naviera SA [1976] 1 Lloyd’s Rep. 8
- Arnold Karberg v Blythe, Green, Jourdain & Co [1916] 1 QB 495
- The Julia Case [1949] A.C. 293
- Societe des Industries Metallurgiques SA v Bronx Engineering Co. LTD[1975] 1 Lloyd’s Rep. 465
- Indira Carr and Peter Stone, International Trade Law (5th edn, Routledge 2014).
- Christian Twigg-Flesner; Rick Canavan; Hector L. MacQueen; P. S. Atiyah, Atiyah and Adams’ Sale of Goods, (13th edn, 2016).
- Huber, Peter, and Mullis, Alastair, The CISG: A New Textbook for Students and Practitioners (Sellier-European Law Publishers GmbH, 2007).
- Zahraa, Mahdi and Ghith Aburima Abdullah, ‘Specific Performance Under the Vienna Sales Convention, English Law and Libyan Law’, (2000) Vol. 15 Arab Law Quarterly, 304.
- Liang, Wenqiong, ‘Does the CISG Put too much Emphasis on Promoting Performance of the Contract A Comparison with the English Law’, (2015) Vol. 1 Issue 2 International Journal of Management and Applied Sciences, 31.
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