Risk passes on shipment in an f.o.b. contract, and as from shipment c.i.f. For f.o.b., the rule almost certainly derived from shipment being the point of delivery, at which property, and therefore risk passed - see, e.g., Browne v. Hare - it may also have been assumed in the Bills of Lading Act 1855, s. 1, that property and risk would generally pass together.
However, it soon became clear that the passing of property could be postponed, either by the seller taking bills of lading to his own order, as in Wait v. Baker, or because the cargo was part of an unascertained bulk, as in Inglis v. Stock. Risk was not an issue in Wait v. Baker, but Inglis v. Stock made clear that risk continued to pass on shipment, even though property could not pass until later.
The reason for risk passing on shipment in c.i.f. contracts was probably that they developed from the f.o.b. Certainly the rule was established early, as long ago as the first reported c.i.f. case, Tregelles v. Sewell. But even if the seller's obligations regarding the goods generally end on shipment in a c.i.f. contract, he still has obligations regarding the documents - see e.g. Arnhold Karberg and The Playa Larga (regarding the Marble Island cargo). It is not necessary, however, that the documents are capable of passing property in the goods: see Groom v. Barber and Manbre Saccharine v. Corn Products.
As to exactly when the risk passes, there are no c.i.f. authorities, but there are f.o.b. cases. In Frebold and Sturznickel (Trading as Panda O.H.G.) v. Circle Products Ltd. [1970] 1 Lloyd's Rep. 499, Widgery L.J. talks of delivery being at the ship’s rail, but in a different context Devlin J. was unimpressed by arguments that the ship’s rail should a point at which responsibilities are defined in Pyrene Co. Ltd. v. Scindia Navigation Co. Ltd. [1954] 2 Q.B. 198, and in Colley v. Overseas Exporters [1921] 3 K.B. 302, 307, the view appears to be taken that neither property nor risk normally pass until loading is complete:
"I need only deal with f.o.b. contracts. The presumed intention (see s. 18 of the Act) of the parties has been settled. It seems clear that in the absence of special agreement the property and risk in goods does not in the case of an f.o.b. contract pass from the seller to the buyer till the goods are actually put on board: see Browne v. Hare (1859) 4 H. & N. 822; Inglis v. Stock (1885) 10 App. Cas. 263; Wimble v. Rosenberg [1913] 3 K.B. 743, 747; Benjamin on Sale, 6th ed., p. 785, where several useful cases are collected."
There are genuine exceptions to the risk doctrine in the Sale of Goods Act 1979, s. 32(3), and perhaps also s. 20(2) (although it is difficult to see how that section can apply if delivery is to the ship), but the implied condition in s. 14(2) can also hae the effect of placing risk on the seller for deterioration after shipment. Both these sections are considered in The Rio Sun.
The estoppel reasoning in J.J. Cunningham v. Munro may also in practice affect the passing of risk between the parties.
The doctrine also depends on the contract remaining enforceable by the seller, and therefore risk can be affected by repudiation, mistake and frustration.
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This page was last updated on 26 Dec 97.