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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

Delmar SA sells machinery to Norvik AS on CIF Oslo terms (Incoterms 2020). Delmar ships the goods and obtains the contract of carriage and insurance as required. The goods are damaged by a storm at sea after loading. Which statement is correct?

Norvik bears the risk because under CIF risk passes on loading at the port of shipment, even though the seller pays for carriage and insurance. Norvik can claim against the insurance Delmar arranged. Paying freight does not retain risk with the seller.

  1. ADelmar bears the loss because it arranged and paid for carriage to Oslo
  2. BNorvik bears the risk of the damage, as risk passed on loading, and can claim under the insurance Delmar procuredCorrect
  3. CThe contract is frustrated and neither party is liable

Explanation

Under CIF the seller pays carriage and insurance to the destination port, but risk still passes to the buyer when the goods are on board at the port of shipment. The buyer therefore bears the storm loss and looks to the insurance. Paying for carriage does not keep risk with the seller.

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