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Case analysis: Harper v. Hochstim. Background knowledge about CIF 1. Under a CIF contract, which party is supposed to make shipment?
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Case analysis: Harper v. Hochstim
Background knowledge about CIF 1. Under a CIF contract, which party is supposed to make shipment? • Under a CIF contract, which party is supposed to obtain cargo insurance? And which party is entitled to recover the insurance proceeds from the insurer? • During the shipment under a CIF contract, which party should obtain export license or pay the export duty?
4. What is the nature of “a sale CIF”? 5. What is the general principle to deal with such situation where the specific contract concluded between buyer and seller appears inconsistent with the established trade term? 6. What problems make the contract in this case inconsistent with the established trade term CIF?
What is the nature of “a sale CIF”? “A sale CIF” is a typical documentary sale. The documentary sale is a type of contract for the sale of goods in which the buyer is required to pay upon the presentation of negotiable document of title by the seller instead of the physical delivery of goods. Such sale serves to reduce the transaction risks between a buyer and a seller who are great distances apart by assuring that if one releases the title to the goods the other will release the money.
What is the general principle to deal with such situation where the specific contract concluded between buyer and seller appears inconsistent with the established trade term? Normally, courts will attempt to give effect to the trade rather than avoid it or transform it into something else, except that the repugnant contract language is unequivocal as to the intent of the parties.
Harper v. Hochstim Facts a Chinese seller a N.Y. buyer
Legal issues: 1. Whether the buyer should take delivery of goods. (whether the buyer’s refusal is breach of contract) 2.The key legal issue in judge’s eye is as to the nature of the contract admittedly made by two parties, that is, whether this is a sale CIF contract. 2. Reasoning • Claims of two parties • Judge’s reasoning steps
Reasoning • Claims of two parties (1) the arguments made by the parties (2) the reasoning logic in developing their arguments • Judge’s opinion (1) Judge agrees with the buyer (2) Judge’s reasoning steps
Claims of two parties (1)The seller (Plaintiff)’s claims some repugnant proviso The contract in this case is not a CIF contract Tender of goods in N.Y. should be accepted The buyer’s refusal breached the contract.
(2)The buyer (defendant)’s claims The contract concluded here is a CIF contract. Under the CIF term what we are entitled to obtain is the documents of title of goods. Our refusal of the seller’s physical delivery of goods doesn't breach a CIF contract.
Judge’s opinion---- agree with the buyer Judge’s reasoning steps • To clarify the nature of a sale CIF ----the documentary sale (2) To point out the inconsistency of the contract of this case and a standard CIF contract (3) To explain that this inconsistency is not repugnant enough to influence the CIF nature of the contract by giving an interpretation to this inconsistency
Judge figures out an interpretation to the repugnant contract term relating to insurance and confirms the CIF nature of contract of this case. Interpretation----Under the CIF contract it is possible for the seller to buy insurance in his own name and recover the insurance proceeds from the insurer as the seller may act as the buyer’s agent and the buyer authorizes the seller to get the insurance.
Conclusion As the judge confirms this is still a CIF contract, the seller needs to deliver documents to the buyer according to CIF terms. In the situation where the seller makes a physical delivery of goods, the buyer’s refusal of acceptance of goods does not lead to breach of contract.
