Decided on February 29,1960



Bose, J. - (1.) This appeal is from a decision of Mr. Justice G.K. Mitter and involves determination of the true nature and scope of two contracts for the sale of certain goods. On 9-11-1948 the appellant-Company entered into two written contracts with the respondent for the sale of caustic soda to be imported from U. S. A, at the price of Rs. 32/8/- per cwt. Ex. Jetty Calcutta on inter alia the terms and conditions that shipment was to be November-December, 1948 and the respondent would have to pay 25 per cent of the price by way of advance deposit. In pursuance of the contracts, the respondent on 15-11-1948 paid Rs. 8,125/- being the 25 per cent of the price of the goods. The case of the respondent, as alleged in the plaint, is that the goods were not shioped during November and December, 1948 and the appellant failed to deliver any goods of November-December shipment or at all and they thus committed breach of the contracts. The respondent, therefore, claimed refund of Rs. 8,125/- and Rs. 5,000/- as damages for loss: of profit. Before the learned trial Judge no evidence was given as to the claim for damages. The-only relief that the learned Judge has granted is a decree for refund of the sum of Rs. 8,125/- in favour of the plaintiff-respondent. It may be pointed out that although in the plaint a definite case was made that the defendant-company had wrongly entered the terms of the two contracts in their printed C. I. F. contract form and the two contracts were not really C. I. F. contracts but were Ex. Jetty contracts, the plaintiff did not pursue the case at the hearing that the terms had been wrongly entered in C. I. F. contract form-as alleged in the plaint. Before us the main contention of the learned counsel for the appellant is that the learned trial Judge is wrong in his finding that the defendant-appellant had committed a breach of the contracts. Before dealing with the contentions raised, it will be convenient to set out at this stage the relevant clauses of the contract. There is a heading in the contract form which is as follows: "Indent on C. I. F. Terms, No. FC/114. Shipment:-- November/December. 1948. Price: Rs. 3278/- Ex. Jetty. (This was substituted after scoring out the following words Rs. 25/8/- (Twenty-five and annas eight only) per cwt, C. I. F. Calcutta). Payment-- An advance deposit of 25 per cent of the C. I. F. value and duty i. e. Rs. 6,500/-(Rupees Six thousand five hundred Only) we shall pay forthwith, on acceptance of this Indent while the balance we undertake to pay immediately on presentation of shipping documents." It may be pointed out in this connection that in the other contract the following words appear against this item 'payment.' "Payment--An advance deposit of 25 per cent, of the C.I.F. value plus customs duty and clearing charges amounting to Rs. 1,625/- (Rupees one thousand six hundred and Twenty five only) x x x" Then clause 2 of the contract runs as follows: "Payment shall, on receipt by the Indentors of notice to pay, be made forthwith to the firm in case at Calcutta against documents which shall consist of- (1) The Firms or at their option their Home friends' invoice. (2) Rill of Lading or at the Firm's option Delivery Order or Letter or Guarantee or Delivery Telegram and (3) Policy of Insurance or at the Firm's option Certificate of Insurance or Letter of Insurance. No payment or any part thereof when due hereunder shall under any circumstances be withheld by the Indentors owing to any claim whatsoever in respect of the goods and all such claims if any shall be notified in writing to the Firm within 14 days from the arrival of the goods at port of destination after which no claim shall be entertained by the firm." Clause 5 of the contract is as follows:-- "It is hereby expressly agreed that the goods under this Indent shall after arrival of the steamer at port of destination continue to remain at the sole risks in all respects of the Indentors and that on failure of the Indentors to pay against and take up the documents as abovementioned the Firm may at their option but shall not be bound to land, clear and store the goods for the Indentors' account and may at the like option but without obligation as aforesaid insure the goods, x x x x x" The next relevant clause is clause 11 which reads as follows: "The indentors shall not under any circumstances raise any dispute as to late shipment or delivery if same be only 15 days after the specified time and they agree to abide by the condition of the Bills of Lading and to accept the date of the Bill of Lading or the date of 'Received for shipment', Bill of Lading or the date of steamer owners' or agents or other transport. Agency or Carrier's dock, canal, railway or wharfinger's receipt or certificate as conclusive evidence of the date of shipment without further proof being required."
(2.) Now the first question to be considered is what is the nature and scope of this contract. The form in which the contract is entered into is designated as 'C.I.F.' It is well settled that the essential feature of an ordinary C.I.F. contract as compared with an ordinary contract for the sale of goods rests in the fact that performance of the bargain is to be fulfilled by delivery of documents representing the goods and not by the actual physical delivery of the goods by the seller. The principal obligations which, a seller undertakes in a C.I.F. contract in the strict sense of the term are (a) to ship at the port of shipment within the time mentioned in the contract goods of the description " contained in the contract, (b) to procure on shipment a contract of affreightment under which the goods will be delivered at the destination contemplated by the contract, (c) to effect an insurance on the goods upon the terms current in the trade which will be available for the benefit of the buyer, (d) to make out an invoice of the goods and (e) to tender these documents to the buyer -- the bill of lading, the invoice and the policy of insurance. But variations in one or other of these obligations, or inclusion of terms in the contract inconsistent with these obligations do not prevent the contract from being a C. I. F. contract provided they do not affect the essential character of the contract. The only obligation on the buyer, apart from express agreement is to be ready and willing to pay the price in exchange for the documents. There is some controversy on the question as to whether the payment of the price and the tender of the documents are concurrent conditions or the buyer must pay the agreed price within a reasonable time of the presentation of the documents. It is not however necessary for the purpose of this case to enter into a discussion of this controversial question.
(3.) In a recent decision of the Madras High Court reported in Narayanaswami Chetti v. Soundara Rajan and Co., AIR 1958 Mad 43, the nature and scope of the C.I.F. contract has been described) in the following words:-- "The vendor on C.I.F. terms is in the absence of any specific provision to the contrary, bound by his contract (i) to make out an invoice of the goods, sold, (ii) to ship the goods at the port of shipment unless the contract is in regard to goods already afloat, (iii) to procure on shipment a contract of affreightment under which goods will be delivered at the destination contemplated by the contract) and (iv) to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer. The seller having procured the necessary documents is under an obligation to send them forward to the buyer accompanied by an invoice showing the amount due from the buyer within a reasonable time. He must make every reasonable exertion to send them forward as soon as possible after he has destined the goods to the buyer. If no place be named in the contract for the tender of the shipping documents, they must prima facie be tendered at toe residence or place of business of the buyer. The buyer must be prepared to pay or accept the draft, as the case may be, according to the terms of the contract of sale, within a reasonable time after the shipping documents are tendered to him. What is a reasonable time is a question of fact depending on the circumstances of that case. In ordinary cases obviously payment must be made promptly on the tender of the documents with the invoice. As the essential feature of a contract of sale C.I.F. is that performance is satisfied by delivery of documents and not by the actual physical delivery of the goods, it follows that all that the buyer can call for is the delivery of the documents we have mentioned. This represents the measure of the buyer's right and the extent of the vendor's duty. The buyer cannot refuse the documents and ask for the actual goods nor can the vendor withhold the documents and tender the goods they represent.";

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