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ACCA Applied Skills · Corporate and Business Law (Global) · Introduction to the UN Convention on Contracts for the International Sale of Goods and ICC Incoterms

Marlow Co in Country A sells goods to Tesk Ltd in Country B on CIF Port of Tesk terms, Incoterms 2020. Goods are damaged by a storm at sea after loading. Which statement is correct?

Under CIF, risk passes to the buyer when goods are loaded on board at the port of shipment, although the seller pays freight and must obtain insurance for the buyer's benefit. The buyer therefore bears the storm loss and claims on the policy.

  1. AThe seller bears the risk because it paid for carriage to the destination port
  2. BThe buyer bears the risk of damage from loading onward, but the seller must have procured insurance in the buyer's favourCorrect
  3. CThe risk stays with the seller until the buyer inspects the goods at destination
  4. DThe seller has no obligation to arrange insurance under CIF

Explanation

Under CIF the seller pays carriage and procures minimum cover insurance, but risk passes to the buyer once the goods are on board at the port of shipment. So the buyer bears the storm loss and claims under the insurance. Option A confuses cost with risk.

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