KING'S BENCH DIVISION [1919] 1 K.B. 198.
Facts, decision, extract from judgment, notes
The sale contract (c.i.f.) was for (among other items) a number of 280 lb. bags of starch. Bags of 140 lb. and 220 lb. were actually shipped aboard the Algonquin, which was later sunk by a German submarine, with the loss of all the cargo aboard. The defendant sellers, knowing of this, two days later tendered documents including a letter which declared that the goods were insured, but no policy of insurance.
The buyers refused to accept the documents and sued the sellers for damages for breach of the sale contract (the market value of equivalent goods having risen considerably above the original price).
Note that it was not clear in Groom v. Barber whether the seller knew of the loss at the time of tender, and there was authority in the Olympia Oil and Cake Co. case [1915] 1 K.B. 233 that a seller cannot appropriate to a contract goods which he knows at time of appropriation to be lost. However, the latter case was not a c.i.f. contract proper (it is probably best categorised as ex-ship), was decided on the construction of the particular contract, and was in any case later doubted [1917] 1 K.B. 320.
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1. McCardie J. stated that a c.i.f. seller was generally able to tender bills of lading for goods, even though he knew that the goods had been lost at sea (this had not been proved in Groom v. Barber).
2. In fact the buyer was able validly to reject them because there was no policy of insurance tendered (this aspect of the case is covered later in the course), and because the goods were of the wrong size. The size of the bags was part of the description of the goods, so the substitution of a different size by the seller constituted a breach of contract. It was for this reason, however, and not because the goods had been lost at sea, that the buyer was able to reject the documents tendered.
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... If the vendor fulfils his contract by shipping the appropriate goods in the appropriate manner under a proper contract of carriage, and if he also obtains the proper documents for tender to the purchaser, I am unable to see how the rights or duties of either party are affected by the loss of ship or goods, or by knowledge of such loss by the vendor, prior to actual tender of the documents. If the ship be lost prior to tender but without the knowledge of the seller it was, I assume, always clear that he could make an effective proffer of the documents to the buyer. In my opinion, it is also clear that he can make an effective tender even though he possess at the time of tender actual knowledge of the loss of the ship or goods. For the purchaser in case of loss will get the documents he bargained for; and if the policy be that required by the contract, and if the loss be covered thereby, he will secure the insurance moneys. The contingency of loss is within and not outside the contemplation of the parties to a c.i.f. contract. The views I have expressed are, I feel, in full accord with the observations of Atkin J in C. Groom v. Barber as to the requirements of a c.i.f. contract, and with the judgment of Bailhache J in In re Weis & Co. and Credit Colonial et Commercial (Antwerp) [1916] 1 KB 346. I therefore hold that the plaintiffs were not entitled to reject the tender of documents in the present case upon the ground that the Algonquin had, to the knowledge of the defendants, sunk prior to the tender of documents. This view will simplify the performance of c.i.f. contracts and prevent delay either through doubts as to the loss of ship or goods or through difficult questions with regard to the knowledge or suspicion of a vendor as to the actual occurrence of a loss ...
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1. Paragraph 1 of the decision (above) is dicta only.
2. McCardie J. regarded the Olympia Oil and Cake Co. case [1915] 1 K.B. 233 as not laying down any general principle for c.i.f. contracts; he did not think the contract there was c.i.f. at all, and indeed, it looks more like an ex-ship contract.
3. In The Galatia [1980] 1 W.L.R. 495, the cargo (sugar) was damaged by fire just after loading, and discharged. This was before the bill of lading was even issued, and indeed the bill of lading was claused to show the damage to the goods:
"Cargo covered by this Bill of Lading has been discharged Kandla view damaged by fire and/or water used to extinguish fire for which general average declared."
Yet the Court of Appeal held that the buyer must accept the documents tendered. This is consistent with the general principle that the goods are at the buyer's risk once loading is complete. Note also that because of the clausing, the seller must have known of the condition of the goods at the time the bill of lading was tendered.
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