The Physical and Documentary Obligations of the Seller in Shipment Sales

1. The physical and documentary obligations of the seller in shipment sales

In shipment sales, the sellers do not guarantee the safe arrival of goods to the agreed port of discharge. They merely undertake:

(1) to ship contractual goods at the designated port of loading within the shipment period (but what happens where there is a string sale, how can a seller down the string ship the goods?).

String sale: seller a sells good to seller b, and the goods are damaged in this stage. Then b sells to seller c, and then sells to seller d. the seller d only has the contract with seller c, so d can only claim damage to c, not to a and b.

(2) to tender conforming documents to buyers (or to a bank where a L/C is in place) for payment.

If the seller makes the contract of carriage before the contract of sale, the goods are damaged. Should the buyer pay for it? Yes, the buyer should pay for damages. because it’s the function of the shipment.

2. Who makes the contract of carriage, the seller or the buyer?

The position is generally quite straightforward:

In case of CIF (and C&F) contracts: the seller

In case of FOB contracts: it depends on the type of FOB (see *Pyrene v. Scindia [1954] 2 QB 402)

3. CIF sales

The shipping documents are pivotal in CIF sales. In the absence of any contrary provision in the sale contract or of any relevant trade usage or custom, the seller assumes the obligation (documentary obligation) to provide the relevant shipping documents. These include:

1. A clean bill of lading indicating the existence of a contract of carriage to the agreed destination.

b/l is the document that says sth about the conditions. Bill of lading, means a document which evidences a contract of carriage by sea and the taking over or loading of the goods by the carrier, and by which the carrier undertakes to deliver the goods against surrender of the document. A provision in the document that the goods are to be delivered to the order of a named person, or to order, or to bearer, constitutes such an undertaking.

Clean b/l, say that the goods in apparent are in good condition. It is not saying the there is sth wrong with the goods.

Why should seller tender a clean b/l?

The seller in the cif takes the obligation of making contract of carriage. The clean b/l is a legal document to show that carrier has the goods on the ship, and the risk has transferred from seller to the buyer. if not, the seller should take the risk. So, it is the