What is C.I.F. Contract ?

A C.I.F. contract means a contract in which the price fixed between the parties includes cost, insurance and freight. This kind of contract is fairly common in trade and certain advantages over the ordinary kind of contract. A contract may be a C.I.F. contract in either of two ways: (i) it may be C.I.F. as to price only, i.e. it resembles the ordinary contract of sale and purchase in all respects, with this difference only, and that the price includes costs, insurance and freight. This is not the real, genuine kind of the sale of goods, mentioned above, and particularly the rule that generally delivery is against payment of the price.

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A real C.I.F. contract, however, is distinguishable from the normal contract of sale and purchase of goods in a variety of points. Its chief distinguishing feature is that, in such a contract, the seller performs his obligations under the contract, by delivering the buyer, not the goods themselves but the relevant “shipping documents” with regards to the goods. Under such a contract, all the buyer can demand of the seller before payment of the price is delivery of the proper “shipping documents”.

The seller also cannot demand the payment of price from the buyer except on the tender of such documents to the buyer. The legal obligations of a seller under a proper C.I.F. contract are: (i)to ship at the fixed port of dispatch, goods of the contract description , (ii) to procure a proper contract of affreightment for them;(iii) to arrange for a proper insurance of the goods; (iv) to make out a proper invoice respecting the goods ; (v) to dispatch these documents (called “shipping documents”) to the buyer with all reasonable dispatch; and (vi) to tender them to buyer (against payment of the price).

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