(1872) L.R. 5 H.L. 395
The case concerned the interpretation by an agent of equivocal instructions by the principal, to procure goods on c.i.f. terms, but the main importance of the case lies in the following passage taken from the following observations of Blackburn J. in advising the House of Lords, at pp. 406, 407:
"The terms at a price, ‘to cover cost, freight, and insurance, payment by acceptance on receiving shipping documents,’ are very usual, and are perfectly well understood in practice. The invoice is made out debiting the consignee with the agreed price (or the actual cost and commission, with the premiums of insurance, and the freight, as the case may be), and giving him credit for the amount of the freight which he will have to pay to the shipowner on actual delivery, and for the balance a draft is drawn on the consignee which he is bound to accept (if the shipment be in conformity with his contract) on having handed to him the charterparty, bill of lading, and policy of insurance. Should the ship arrive with the goods on board he will have to pay the freight, which will make up the amount he has engaged to pay. Should the goods not be delivered in consequence of a peril of the sea, he is not called on to pay the freight, and he will recover the amount of his interest in the goods under the policy. If the non-delivery is in consequence of some misconduct on the part of the master or mariners, not covered by the policy, he will recover it from the shipowner. In substance, therefore the consignee pays, though in a different manner, the same price as if the goods had been bought and shipped to him in the ordinary way.
"If the consignor is a person who has contracted to supply the goods at an agreed price, to cover cost, freight and insurance, the amount inserted in the invoice is the agreed price, and no commission is charged. In such a case it is obvious that if freight is high, the consignor gets the less for the goods he supplies, if freight is low he gets the more. But inasmuch as he has contracted to supply the goods at this price he is bound to do so, though, owing to the rise in prices at the port of shipment making him pay more for the goods, or of freight causing him to receive less himself, because the shipowner receives more, his bargain may turn out a bad one. On the other hand, if owing to the fall in prices in the port of shipment, or of freight, the bargain is a good one, the consignee still must pay the full agreed price. This results from the contract being one by which the one party binds himself absolutely to supply the goods in a vessel such as is stipulated for, at a fixed price, to be paid for in the customary manner, that is, part by acceptance on receipt of the customary documents, and part by paying the freight on delivery, and the other party binds himself to pay that fixed price. Each party there takes upon himself the risk of the rise or fall in price, and there is no contract of agency or trust between them, and therefore no commission is charged."
Note: one of the reasons for the rejection by McCardie J in Diamond Alkali of the received for shipment bill of lading as good tender c.i.f. was because the tender of documents is the method by which the goods are delivered. Ireland v Livingston was one of the authorities cited for this proposition.
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