'Define a CIF contract, and what are its advantage and disadvantage in practice?'
CIF stands for "cost, insurance and freight" by INCOTERMS 2000. It is a contract of sale for international transportation of goods to the agreed destination between seller and the buyer. CIF requires the seller to arrange time and place of delivery, freight charges, and insurance whereas the buyer will be responsible to pay taxes and dues after the loading of the goods.[1] Johnson v Taylor
The advantage of CIF allows the seller higher margin of profit as it allows the seller to obtain reasonable freight and insurance rates depending on the prevailing economy. Furthermore the seller can charge higher price for the service he provides. The seller is generally paid in advance, and seller has the knowledge and expertise in procuring a suitable insurance and transportation. CIF is unique in a sense that it provides insurance so risk is generally not a factor. The only party that is affected is the insurance company.
CIF does has its disadvantage. The buyer takes all the risk for the period of the carriage, and the buyer has no means of controlling or limiting those risks. The upper hand falls on the seller as the seller could control the cost incurred. And upon tendering the documents, buyer must pay the agreed price; even if the goods are lost or damaged at sea, the money has been paid. Also, the buyer has no opportunity to inspect the goods.
In a nutshell, CIF provides a fair protection to both parties. Even if the disadvantage is more on the buyer, insurance will cover the damages and lost. To deal with disputes, a stricter and clearer provision will help in the clarity of the contract.
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