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Contracts • Terms of the Contract
K#093
Legal Definition
CIF and CF mean that the price in the contract includes the price of goods, the cost of shipping them to the buyer, and—in CIF contracts—the cost of purchasing insurance for the buyer's benefit. These contracts are always shipment contracts.
Plain English Explanation
When something goes wrong and a court needs to figure out who is liable for what, the terms of a contract let the court know what the parties agreed to. "CIF" and "CF" are specific shipping contract terms that tell the court "The price the buyer paid included extra stuff." That "extra stuff" in a contract with a "CF" term means "cost of goods and cost of shipping." Similarly, in a "CIF" contract, it would additionally include the cost of insurance to cover losses for the buyer.
Hypothetical
Hypo 1: Sam is in New York. Bob is in California. Bob buys 100 widgets from Sam. Sam says, "I'll sell you then for $1,000." Bob says, "Okay, but I want them CIF." Sam agrees and delivers the widgets to a common carrier to be shipped to Bob. On their way, a tornado hits the train they are on, destroying all the widgets. Sam never paid for insurance. Result: Sam was supposed to buy insurance. If he claims, "Bob never paid extra for that." Bob will respond that the cost of insurance was part of the $1,000 he paid. Bob is correct.
Visual Aids
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