This question examines the nature of CIF contracts

Question One: “Whether Bargain Bank has to pay Knoxtox the sum due under the missive of credit” . In replying this inquiry, one must look to the built-in nature of letters of recognition. Letterss of recognition are by their very nature separate minutess from the gross revenues or other contracts on which they may be based and Bankss are normally in no manner concerned with or bound by such contracts even if any mention in included in the recognition [ 1 ] . In replying the inquiry, it is the instance that Bargain Bank must honor its duty to pay Knoxtox the sum under the missive of recognition. Although, Bargain Bank opened the missive of recognition on the instructions of Quarry Ltd, its project to Knoxtox is given as a principal, and non as Quarry Ltd’s agent. This therefore means that the project must be honoured despite breach of the underlying contract of sale. This means that where there is a difference between Knoxtox and Quarry Ltd sing the status of the goods or their quality, Bargain Bank is non permitted to raise breaches of the sale contract to forestall payment under a missive of recognition. Such an effort will constantly be blocked by the tribunals, which have taken to the rigorous application of the autonomy rule of letters of recognition.

Question Two: “Whether Quarry Ltd have a right to reject the goods or documents” .

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The rights of rejection of goods in C.I.F. contracts was dealt with in the instance ofKwei Tek Chao v British Traders and Shippers Ltd[ 2 ] where Devlin J stated that a purchaser who has paid for and accepted paperss which appear to be conforming leading facie could still reject the goods if theymake non conformto the contract. If he rejects the goods and signifies his rejection to the marketer, the belongings in goods returns to the marketer. It is the instance that rejection of goods is merely available where the marketer has shipped non-conforming goods in the first topographic point. Where the general character of goods has changed during the ocean trip, the marketer can non be held apt for it. The claim in such a instance must lie against either the insurance company or the bearer, as it would be unfair to keep the marketer responsible for the impairment of goods that have long ceased to be under his control and supervising.

The right to reject paperss is different from the right to reject the goods [ 3 ] . In the instance ofProctor & A ; Gamble Philippine Manufacturing Corp v. Kurt A Becher Gmbh & A ; Co KG[ 4 ] , it was stated that: “the right to reject the paperss arises when the paperss are tendered, and the right to reject the goods arises when they are landed and when after scrutiny they are non found to be in conformance with the contract” . The right to reject paperss is lost when the purchaser or bank which advises a Letter of Credit for payment of the monetary value takes up the paperss even where they are inaccurate, and wages against them without expostulation. In this instance, it would look that Quarry Ltd have the right to reject the paperss because we are told that Bargain Bank have taken in the paperss for look intoing but have non made any payment to Knoxtox.

Question Three: “Whether High Seas Co are apt for the loss of and damage to the detonators”

UnderArticle 5 of theUnited Nations Convention On The Carriage Of Goods By Sea ( 1978 ), otherwise known as the Hamburg Rules, the bearer is apt for loss ensuing from loss of or damage to the goods, every bit good as from hold in bringing, if the happening which caused the loss, harm or hold took topographic point while the goods were in his charge… unless the bearer proves that he, his retainers or agents took all steps that could moderately be required to avoid the happening and its effects. However this article must be read in the visible radiation ofParagraph 6 of Article IV of the Hague Visby Ruleswhich states that: “

Goods of an inflammable, explosive or unsafe nature to the cargo whereof the bearer, maestro or agent of the bearer has non consented with cognition of their nature and character, may at any clip before discharge be landed at any topographic point, or destroyed or rendered innocuous by the bearer without compensation and the shipper of such goods shall be apt for all amendss and disbursals straight or indirectly originating out of or ensuing from such cargo. If any such goods shipped with such cognition and consent shall go a danger to the ship or lading, they may in wish mode be landed at any topographic point, or destroyed or rendered innocuous by the bearer without liability on the portion of the bearer except to general norm, if any” .

Following from this, it would look that High Seas Co may be apt for the harm ensuing to the goods stored on deck, but non for the goods stored below deck.

Question Four: “Whether Carefree Insurance Co are apt to indemnify the lading proprietor under the policy” .

Institute Cargo B clauses provide screen in the event of loss of or damage to the topic affair insured, “ moderately attributable to: fire or detonation ; vas of trade being stranded, grounded, sunk or capsized ; turn overing or derailment of land conveyance ; entry of sea, lake or river H2O into the vas, trade, clasp, conveyance, container, lift, new wave or topographic point of storage ; entire loss of any bundle lost overboard or dripped while lading on to or droping from vas or trade ; wet harm from sea, lake or river H2O and accidents in burden and discharging.

Following from this, it would look that Carefree Insurance Co would be apt under the insurance since the policy covers the sort of losingss and harm that have occurred. However the inquiry as to whether the insurance companies are apt to the lading proprietor must be answered in the visible radiation of the inquiry of whether belongings in the goods has passed to Quarry Ltd. Property in goods in c.i.f. contracts passes to the purchaser when the marketer transfers the measure of ladling and the insurance policy to the purchaser thereby giving him the right of action in regard of loss or harm to the goods. In this instance, it seems that belongings in the goods have already passed, in that Knoxtox have already delivered the paperss to Quarry Ltd. Quarry Ltd would hence be regarded as the lading proprietors and Carefree Insurance Co would be apt to indemnify them under the policy.

  1. Goode, R. 2004, Commercial Law, 3rd edition, LexisNexis, London.
  1. Dalhuisen, J.H, 2004, Dalhuisen on International Commercial, Financial and Trade Law, 2nd edition, Hart Publishing, Oxford.
  1. Ridley, J. 1992, Ridley’s Law of the Carriage of Goods by Land, Sea and Air, 7th edition, Crawford, Kent.
  1. Bradgate, R, 2000, Commercial Law, 3rd edition, Butterworths, London.
  1. Macqueen, H, Adams, J.N, Atiyah, P.S. 2001, The Sale of Goods, 10th edition, Longman Publishing.


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